Monday, 29 July 2013
JUDGE HODGE QC:
- This judgment in the case of AW Group Limited (as claimant) v Taylor Walton (as defendants), HC11C03360, is divided into nine chapters as follows: (1) introduction, (2) the purchase of Packhorse Place, (3) the trial, (4) breach of duty, (5) causation, (6) loss and damage, (7) contributory negligence, (8) interest, and (9) disposal. But I should make it clear at the outset of this judgment that, although it is structured in this way for clarity of exposition, the contents of each separate chapter have informed the contents of the judgment as a whole.
Chapter 1: Introduction.
- By claim form issued on 29 September 2011 the claimant, AW Group Limited, claims damages for professional negligence (namely, breach of contract, negligence and/or breach of fiduciary duty) by the defendant firm of solicitors, Taylor Walton, when acting as the claimant's solicitor in connection with a conveyancing transaction whereby the claimant acquired title to the property known as Packhorse Place and situated at Watling Street, Kensworth in the County of Bedford in November 2005.
- The defendant firm was instructed to investigate the title to Packhorse Place, to include ensuring that all necessary planning consents were in place and/or that the title to the property was otherwise free from encumbrances. It is said that it failed to do so and/or failed to advise that planning experts be retained to deal with planning matters. It is said that, in reliance upon the defendant's advice, the claimant exchanged contracts and completed the purchase of Packhorse Place on or about 2 November 2005 and, as a result, that it has suffered loss and damage, including diminution in the value of the property.
- The claimant alleges principally that Packhorse Place did not have the necessary planning consents to permit it to park HGV lorries on an area to the rear of the property. It says that had it known of this restriction, it would not have gone ahead with the purchase.
- The claimant invites the court to find the following facts as proved: (1) that the defendant was aware of the claimant's intentions for the Packhorse Place site prior to completion in November 2005 and/or that the defendant failed to take adequate instructions in this regard; (2) that the defendant was, or should have been, aware that the Packhorse Place site lacked planning permission for the claimant's intended activities prior to the completion of the property on 2 November 2005; (3) that the defendant failed to advise the claimant on the planning status of the site, adequately or at all, prior to completion of the purchase of the property; and (4) that had the claimant been made aware of the planning status of the site, it would not have proceeded with the purchase.
- The claimant claims the difference between what it paid for the property and what it alleges it was actually worth, together with some further losses that it alleges that it has suffered. The defendant denies breach of duty; but it also says (1) that the claimant would have gone ahead with the purchase in any event, even if it had been advised of the matters that it alleges that it was not; and (2) that if that be wrong, the claimant is entitled only to the difference in price attributable to the absence of the relevant planning permissions. In the context of this last point, the defendant contends that the claimant paid substantially more for the property than it would have been worth even had it had the relevant planning consents.
- For about 12 years before the events in question in these proceedings the claimant (known, until it changed its name to AW Group Limited on 4 August 2005, as Luton Truck Stop Limited) was the owner of premises at Chaul End Lane to the east of Luton, very close to the M1 motorway. The claimant ran a truck stop from this site, providing parking spaces for about 100 heavy goods vehicles, a restaurant and bar, and overnight accommodation for the truck drivers. There were also various buildings on the site, both offices and warehouse buildings. Some of these buildings were used by the claimant and/or its associated companies, AW Transport Limited and AW Commercial Repairs Limited, whilst others were let out to third parties. AW Transport apparently carried out a haulage business, while AW Commercial Repairs had a business repairing commercial vehicles.
- At some point in the late 1990s or early 2000s it became apparent to the claimant that Chaul End had the potential for development into a retail site. A number of bids were made for it over the years and, on 22 November 2002, the claimant accepted an offer from a company called Real Estate Properties Limited for Real Estate to seek planning permission for development on the site and to take an option to purchase it for £6.2 million. That option was capable of exercise on six months' notice. Planning permission was, in the event, granted in about November 2004; and, on 28 April 2005, the option was exercised and the claimant became obliged to vacate the site by 31 October 2005. In the event, the claimant managed to negotiate a licence to continue to occupy the site until 21 November 2005.
- The exercise of the option created an impetus for the claimant to identify alternative real property investments. A decision was taken that the claimant would not search for a site simply to replicate all of its activities at Chaul End. The extent to which it intended to continue those activities is a matter that was explored in the evidence before me. However, it is not disputed that the claimant ended up replacing Chaul End, at least in part, with property that represented pure investment. So, in May 2005, it identified an office block in the centre of Luton, known as Dominion House, which it agreed to purchase for £3.5 million. The view of the valuer instructed on behalf the claimant's funder (National Westminster Bank, or "NatWest"), Miss Jean Howe, was that Dominion House was "a bit of a steal". Contracts for the purchase of Dominion House by the claimant were exchanged on 23 June 2005.
- Packhorse Place was identified as the other site that the claimant could purchase in about July 2005. The claimant agreed to purchase this site for £2.8 million. Before any enquiries were made about the property by solicitors acting for the claimant, it put down a deposit of £140,000 that was to be returnable if the sale failed to go through "by [the seller] only". That was done on 15 July 2005.
- It is an important part of the defendant's case on causation that the £140,000 deposit meant that the claimant was committed to the transaction from the start. Had it pulled out on discovering the planning issues that it alleges it was not advised about, it is said by the defendant that the claimant would have lost that money. The defendant contends that this, coupled with the absolute need for the claimant to vacate Chaul End by 21 November without penalty, and by 5 December 2005 if it was not to lose as much as half a million pounds, would have represented a compelling reason for the claimant to keep to the deal involving the purchase of Packhorse Place even if there was some element of planning risk.
- Packhorse Place is an industrial estate situated behind a petrol station on the A5 to the south west of Luton and to the south east of Dunstable and about 3 miles to the north of junction 9 of the M1. Its location is shown in a map at bundle B5, page 366. On the estate there are seven separate buildings. The general lay-out of the site can be seen on the plan at B4-310. Some of these units were occupied at the time of purchase while some were vacant.
- Unit 1 was an industrial building vacated by its occupier on the sale of the estate to the claimant. As part of the purchase transaction, the claimant split that unit into three, identified as units 1A, 1B and 1C, although the precise identities of these units does appear to have varied from time to time during the course of the transaction. One of those three sub-divided units within unit 1 was to be occupied by one of the claimant's existing tenants at Chaul End, VIP Services/Plasmakers Limited (unit 1A), whilst a new tenant, Creative Concepts (Europe) Limited, was to occupy unit 1B. In the event, unit 1C was let to AW Transport Limited.
- Unit 2 was an office building to the south east of the site. It was occupied by a pre-existing tenant called Alpha Security Limited which had two years remaining of a five year lease. Unit 3, to the south west of unit 2, was a warehouse-type building, also let on an existing four year lease to a company called Gigasat Limited. Unit 4, in the middle of the site, was vacant and was also a warehouse-type building. In the event, it was let to AW Transport Limited upon the purchase of the site although, in fact, it was intended to be occupied by AW Commercial Repairs Limited for the purposes of its commercial vehicle repairing business.
- Unit 5, on the other side of the site, was another warehouse-type building which was also vacant. It was let on purchase of the site to AW Commercial Repairs Limited although this was for occupation by a third party, TG Tyres (Stevenage) Limited, which had already been in occupation, on some short-term licence arrangement, of accommodation at Chaul End.
- Units 6, 7 and 8 were a single building, which is often just referred to as unit 7, towards the rear of the site. It was also a warehouse-type building and it was let on a ten year lease to a company called Pridewatch Services Limited. Unit 9 was a small office next to unit 4 in the middle of the site. It was vacant and was included in the lease to AW Transport Limited on the purchase of the site.
- Towards the very rear of the site there was an area of unused land upon which a quantity of material removed in the excavation to build unit 7 had been deposited. This is broadly where the area marked on a plan at B4-310 as "HGV Parking Spaces 20 spaces" is situated. It appears that prior to the purchase of the site, but after it had paid over its £140,000 deposit, the claimant obtained permission from the vendors of Packhorse Place to begin the carrying out of works to level this ground and to create a hard standing. That hard standing was subsequently used to park HGVs; and it was the parking of HGVs on this area that resulted in the claimant coming into conflict with the local planning authority.
- All of the units on the site, apart from unit 7, had planning permission for B1 use. Unit 7 had planning permission for B2 and B8 use albeit that that permission was at the time personal to the relevant occupier: see consent SB/TP/03/1809 at bundle J, page 2365.
- The Town and Country Planning Use Classes Order 1987 sets out three use classes that are of relevance to the present proceedings. They are B1, B2 and B8.
- Use Class B1 compromises use for all or any of the following purposes: (a) as an office other than an use within class A2 (financial and professional services), (b), for research and development of products or processes, or (c) for any industrial process, all being a use which can be carried out in any residential area without detriment to the amenity of that area by reason of noise, vibration, smell, fumes, smoke, soot, ash, dust or grit.
- Use class B2 compromises use for the carrying on of an industrial process other than one falling within class B1 above.
- Use class B8 compromises use for storage or as a distribution centre.
- The area upon which the hard standing at the rear of the site was situated was not itself the subject of any planning consent. However, it was referred to in a planning consent, SB/TP/97/0831 (at bundle J, page 2318), relating to the construction of what became unit 7. That consent included as condition 11 the following:
"No part of the land shown hatched blue on Plan 3795/P7 shall be used for open storage, deposit of material or parking of vehicles except as may be essential for the duration of construction works for the development hereby permitted."
- A black and white version of plan 3795/P7 is at bundle J, page 2332. It is understood that the area hatched blue is the area shown on the right-hand diagram, to the rear and to the right of the new building captioned "Condition 11" in handwriting. That area covers a large part, if not all, of the hard standing constructed by the claimant.
- Condition 11 was a condition applying to the planning consent granted for the construction of what became unit 7. It cannot, therefore, be regarded in some wider way as binding upon parties other than the occupier of that unit. However, it is accepted by the defendant that the creation of the hard standing in that area to park HGVs was something that did require planning permission.
- The sale of Chaul End completed on 28 October 2005. That sale released money which, together with an advance of some £922,000 from National Westminster Bank, was enough to purchase Dominion House, which, having exchanged on 23 June, completed on 31 October 2005, and also Packhorse Place, which exchanged and completed simultaneously on 2 or 3 November 2005. National Westminster's bank loan was secured against both properties and, accordingly, was on a low loan to value ratio. The defendant acted for the claimant in relation to all three transactions: the sale of Chaul End, the purchase of Dominion House, and the purchase of Packhorse Place.
- Following completion of the purchase of Packhorse Place at the beginning of November 2005, difficulties only surfaced with regard to the planning status of that property in May of 2006. On 8 May 2006 (at H1915) the local planning authority, South Bedfordshire District Council, issued a letter addressed to AW Transport Limited headed "Non-compliance with condition 8 of SB/TP/03/1809 (deliveries)". That was the planning consent at bundle J, page 2365, affecting unit 7.
- Condition 8 provided that there was to be no loading or unloading or deliveries outside the hours of 8.00 am to 6.30 pm Monday to Friday or outside 9.00 am to 2.00 pm on Saturdays. The letter stated that had it had been brought to the attention of the writer, David Dennis, a planning enforcement officer, that the alleged breach of planning control described above might be occurring at AW Transport, and a check of the local planning authority's records indicated that no planning permission had been granted for that. Under the circumstances, the Council was said to be obliged to consider taking planning enforcement proceedings to resolve the breach of planning control.
- The letter went on to advise that a planning application could be submitted to regularise the breach of planning control, and if AW Transport considered this to be appropriate, application forms for the purpose were enclosed, together with a schedule of relevant fees. They should be completed and returned, together with the required plans and fee, within 14 days. However, as the recipient would appreciate, it was not possible for the local planning authority to comment at that time as to whether such planning permission would be granted.
- The receipt of that letter provoked an email from Lee Allen to Dermot Carey, the responsible fee earner of the defendant firm, on 9 May 2006. Towards the end of that email, and in capital letters, Mr Allen wrote as follows: "We are concerned as to why this restriction has been missed by all." Then there follow six question marks. The letter continued:
"We are looking at a site with restrictions which could lead to the loss of some contracts and the closure of our transport division. Added to this we cannot now start to increase our contract parking (not truck stop) operating licence centre as we have limited hours of operation. The long and short is we would not have purchased this place with restrictions."
- In a later email from Lee Allen to Helen O'Callaghan, another fee earner at the defendant firm, and Dermot Carey, under whose supervision she acted, Lee Allen also asked, in addition to other matters, if Dermot Carey could let Lee Allen know what was happening with what he described as "B8 issues". He was said to need some answers. That email was, so far as I can see, never put to Lee Allen during the course of his cross-examination.
- On 12 May the defendant firm wrote to Mr Dennis, the planning enforcement officer, at H1920, referring to Mr Dennis's letter of 8 May and stating that the consent to which he referred related to a part of the site not utilised by AW Transport and did not, therefore, relate to the breach alleged. Further, in respect of the defendant's client's part of the site, the defendant was said to understand that their client did not load or unload any lorries from the site during the hours referred to; they merely returned to the site and were parked on the site overnight and were then driven off without loading or unloading in the morning.
- Three days later, on 15 May 2006, Helen O'Callaghan wrote to Lee Allen of the claimant (although it was misdescribed as Luton Truck Stop Limited) in the terms set out at H1921 through to 1922. Miss O'Callaghan confirmed that the defendant had written to Mr Dennis and enclosed a copy of its letter. It was said that, hopefully, that would be the end of the matter; but, in any event, Miss O'Callaghan took the opportunity to clarify the planning position regarding the site. Her letter read as follows:
"As you may be aware planning evolves from historic use of land, specific consents and changes of uses and it really only becomes an issue when there is a change in use of land. It is possible that your use of part of the estate to park HGVs may be a change of use and in which case one needs to consider whether it is a material change of use, for which consent would be needed. Packhorse Industrial Estate appears to have a mixture of industrial users attaching to it which are largely B1, B2 and B8 uses. The consents revealed by the local search are largely particular consents obtained for specific units and as you may be aware the consent obtained for one unit does not mean that you can necessarily attach that use to another area of the Estate. In addition the planning history shown in a local search only post dates 1974 and any previous use of land and/or planning consents are not shown. You mentioned to Dermot that two or three HGV licences have been obtained for this site and so it seems likely that there has been a previous use, which is not shown up in the Search.
One other point to bear in mind is that land that has consent to B1 or B2 use can change to B8 without planning consent, where the area is less than a certain square meterage.
You mentioned to Dermot that from your recollection you spoke to me on the telephone in September and asked whether the site had B8 use. My recollection differs slightly in that I recall in our meeting on 27 October you asked me this and although I confirmed that there was B8 use I did point out that this related to unit 7.
However, all that being said, the letter from the Council arises due to a complaint by one of the cottage owners. If the noise is disturbing him would it be possible for your lorries to use the access to the Estate on the other side of the Petrol Station so that any disturbance is minimised? This may be a more practical solution.
I will let you know as and when I get a response from Mr Dennis."
- On 31 August 2006 South Bedfordshire District Council issued a planning contravention notice to AW Transport Limited in relation to the construction of a hard standing. In response to that, in about March or April of 2007, the claimant sought planning permission for the use of that land for the parking of vehicles. That application was refused on 6 July 2007.
- On 5 November 2007 South Bedfordshire District Council issued an enforcement notice requiring, amongst other things, the removal of vehicles from the relevant land and the removal of the hard standing.
- Shortly after this, on 21 November 2007, AW Transport Limited entered into creditors' voluntary liquidation.
- The claimant appealed against the enforcement notice after receiving planning advice from DLA Town Planning Limited that the planning application stood a 50 per cent prospect of success. The appeal against the enforcement notice was heard by the planning inspector on 15 July 2008 but, on 28 July 2008, the appeal was dismissed. In essence, the planning inspector held that the site was in the Green Belt, and that the claimant had not established the circumstances required in order to justify planning permission for HGV parking.
- Following on from that, the claimant indicated a potential claim against the defendant, which ultimately resulted in the instant proceedings. The claimant's initial concern appears to have been its inability to rent out parking spaces for HGVs on the hard standing. However, as matters have progressed, the claimant has also developed a case relating to the permitted use of the units themselves.
- It is asserted that the claimant required B2 use for its commercial vehicle repair business in unit 4 whereas, in fact, there was only B1 use, except the personal consent for B2 and B8 use affecting unit 7. The claimant also asserts, by an amendment for which permission was given at trial (although it was foreshadowed by the claimant's witness statements), that it required planning permission in order to carry on its road haulage business.
- I should mention that on 5 February 2009 AW Commercial Repairs Limited also entered into creditors' voluntary liquidation.
- The defendant invites the court to note that, as the defendant understands matters, no action has ever been taken by the local planning authority in relation to the use of the units themselves, notwithstanding clear evidence that some at least have been used for B2 use; nor has the planning authority sought to prevent the parking of HGV vehicles on the site, otherwise than on the hard standing at the rear of the site. That is the only area in relation to which enforcement action has been taken. So far as the defendant understands it, no application has been made by the claimant to regularize the B2 use in any unit in which it says that that use is required.
Chapter 2: The purchase of Packhorse Place.
- The first reference to Packhorse Place appears in a letter that Lambert Smith Hampton wrote to the claimant on 28 October 2003.
- At some stage, in either May or June of 2005, there was a meeting at Dominion House, which the claimant was then seriously considering purchasing, attended by Dermot Carey of the defendant firm of solicitors, Russell Allen of the claimant company and a Mr Franklin, who was an accountant acting for the claimant. It is said by Mr Franklin and Russell Allen, but denied by Dermot Carey, that there was some informal discussion at that time about the claimant obtaining roll-over relief in order to prevent an immediate charge to Capital Gains Tax on the claimant's sale of Chaul End. Mr Franklin puts the date of that meeting at 20 May 2005. Mr Carey puts it about a month later, on 20 June. Mr Franklin's evidence is at paragraphs 15 to 17 of his witness statement, and he was cross-examined about it at day 4, pages 137 to 141. Mr Carey was cross-examined about it at day 4, pages 171 to 172 and day 5, pages 107 to 109.
- On 23 June 2005 details of Packhorse Place were faxed through to the claimant by Lambert Smith Hampton. Within the fax it was stated that it was Lambert Smith Hampton's opinion that the site "would suit an owner-occupier who needs to separate out a number of business operations, or an investor/developer who may be looking to let or sell individual units, or indeed to alter the larger vacated units in order to provide smaller accommodation": see page 860.
- On 8 July 2005 an email from Jacqui Perkins, his secretary, to Dermot Carey and headed "Russ Allen" recorded that the claimant had bought an industrial estate at the Packhorse along the A5 for £2.8 million plus VAT.
- On 15 July 2005 there were a number of relevant communications. First, NatWest wrote to Russ Allen, the managing director of the claimant's holding company, AW Securities Limited, indicating that the bank was happy to provide a loan of £140,000 to enable Russ Allen to pay an initial deposit on Packhorse Place. The letter set out a number of requirements. A detailed schedule of tenants and terms was required. The writer recorded that he had Lee's handwritten note, but that he needed something more formal. The letter also stated that there needed to be pre-lets in respect of Packhorse Place for a minimum £200,000 per annum rental income. It was said that that needed to be progressed to the formal lease stage, which the writer understood to be the claimant's intention anyway. That requirement was never apparently communicated to the defendant firm until about early October of 2005.
- Also on 15 July 2005 Lee Allen and his father, Russell Allen, sought the defendant's advice on a proposed £140,000 deposit for Packhorse Place. A file note is at page 911. It records that Jacqui Perkins, Mr Allen's secretary, spoke to Lee Allen on 13 July at 9.30 am. Russ was wanting to give a cheque for the deposit to the seller's solicitors that day. There was then a telephone call from Russ Allen himself. It was said by Mr Carey that Russ should be told that if he were providing a cheque to the other side's solicitors without it coming through the defendant firm, he should make sure that the solicitors and their clients (the sellers) were aware that the deposit was a gesture of good will and that the deposit was a returnable deposit should matters not proceed.
- Miss Perkins spoke to Lee because Russ was unavailable, and Lee confirmed that he would prepare a letter to that effect and fax it to the defendant firm for approval before releasing the cheque. Such a letter was sent through. It is at 912. It is said that the agreement was to confirm that the cheque for £140,000 made out to the seller's solicitors, Sydney Mitchell, was a goodwill gesture and a returnable deposit for the purchase of Packhorse Place, "the return of the Deposit being that the sale of said property fails to go through". Dermot Carey apparently considered that draft, which had been sent to him by Lee, and emailed back that in the context of what had been discussed it seemed to do the trick.
- In the event, when Russell Allen came to hand the deposit over to the sellers, the draft was amended to record that:
"The return of the Deposit being that the sale of said property fails to go through."
Added in manuscript are the words, "By Unicorn [the sellers] only".
The document was signed on behalf of the buyer, then Luton Truck Stop, by Russell Allen, and was signed on behalf of the sellers.
- On about 19 July Dermot Carey prepared a holiday note for the file. It was headed:
"Luton Truck Stop Limited re purchase of Packhorse Place."
It said that Russ Allen of Luton Truck Stop Limited was in tentative negotiations to acquire an industrial estate just beyond the Packhorse Pub on the A5 for £2.8 million plus VAT. Russ was said to have tendered a cheque to the seller raised as a returnable deposit and goodwill gesture to persuade the seller to desist from selling the site in two parts to parties to whom papers had been despatched. As at Tuesday 19 July, Mr Carey was said to be awaiting confirmation that Russell had secured the site and that papers were being despatched. On receipt of papers, normal searches would need to be commissioned. The site was said to be an industrial estate behind a petrol filling station on the A5 with about eight or nine units, of which Mr Carey believed five to six to be currently let. Site check reports were to be commissioned as well as local and commons searches. Client contacts were said to be Russ Allen and Lee Allen, his son. Mr Carey's secretary was said to have the details. It was said that Russ and Lee Allen had sold Luton Truck Stop to Helical Properties, and that the matter was to complete at the end of October for a consideration in excess of £6 million. The Allens were said to have exchanged to purchase Dominion House in Luton, which Mr Carey had dealt with, and this was said to be the second acquisition from the intended sale proceeds.
- On 21 July 2005 Sydney Mitchell, the solicitors acting for the sellers of Packhorse Place, wrote to the defendants enclosing planning permissions in their possession.
- On 26 July heads of terms were prepared in respect of Packhorse Place. The purchase price was said to be £2.8 million exclusive of VAT. The timescale was said to be that exchange was to occur contemporaneously with completion, at the end of October 2005. The purchaser was said to have deposited a refundable deposit on the vendor's non-performance of £140,000.
- On 28 July Sydney Mitchell sent replies to standard enquiries on Packhorse Place.
- On 4 August 2005 the claimant changed its name from Luton Truck Stop Limited to AW Group Limited.
- On 11 August South Bedfordshire District Council provided details of the planning charges affecting the property. Amongst those disclosed was 2003/1809, dated 21 March 2004, which was described as "consent to change of use from B1 to B2 and B8 use subject to conditions".
- On 22 August 2005 Dermot Carey wrote to Eversheds, who were Helical's solicitors, stating that his client wished to complete the sale of Chaul End on 27 October with a short-term licence until 21 November 2005 rent free with a £1 million retention.
- In late August or early September Mr Russell Allen and his son Lee assert that they had a telephone conversation with Miss O'Callaghan of the defendant firm relating to a planning notice which they say they had found on a gate at the property. Lee Allen deals with this in his witness statement at paragraphs 19 to 23, and his evidence on the point is at day 3, pages 190 to 192. Russell Allen deals with the matter in his witness statement at paragraphs 40 to 43 and it is fair to say there he is less specific about what the claimant was inquiring about from Miss O'Callaghan. His evidence on this is at day 3, pages 61 to 69, and in particular at pages 66 to 67. Miss O'Callaghan denies that this conversation ever took place. She deals with it in her witness statement at paragraph 6, and her evidence on the point is at day 6, pages 18 to 21. When I come to chapter 4 of this judgment (breach of duty) I will have to make findings about whether that conversation took place and, if so, what was said.
- On 1 September 2005 (at pages 1034 to 1035), Mr Carey submitted his report on title, together with a summary of the leases affecting Packhorse Place, to Mr Russell and Mr Lee Allen. The report on title itself is at page 922. In the course of his covering letter, Mr Carey recorded that, as he recalled, the Allens would be transferring their "business" from Chaul End Lane to Packhorse Place. In cross-examination Mr Carey explained that the reference to "transferring their business" was to the business of "tenanted commercial property": see day 5 at pages 15 to 16 and page 18.
- On the same day, 1 September 2005, Mr Carey also met with Lee Allen to discuss future lease and management issues. A note of that meeting appears at pages 1036 to 1037. It is unclear, because the attendance note makes no reference to either the report on title or the summary of leases, whether those documents had been submitted to Lee Allen before his meeting with Mr Carey on 1 September.
- The report on title, which surprisingly both Russell Allen and Lee Allen said in evidence they would probably not have read, disclosed little about the planning position in relation to Packhorse Place. That was because by that time Miss O'Callaghan and Mr Carey had received very little by way of planning information about the site. At page 923, under the heading "Local Search", the report on title merely says this:
"The local search reveals the various planning consents. I received sight of some of them but not all and have requested copies of the remaining. The property is in a greenbelt area and also in an area of outstanding natural beauty and an area of great landscape value. Other than that there are no other adverse entries."
- On 5 September the local planning authority sent Sydney Mitchell copies of a number of planning consents, 84/66, 86/176, 96/293 and 03/1809.
- Also on 5 September Mr Carey sent a memorandum to Helen O'Callaghan. He referred to their discussions the previous week. He said that his mind was now turning, as was the client's, to generating occupational documentation for future lettings at Packhorse Place. His memo then went on:
"As you are aware not only are our clients acquiring Packhorse Place as an investment but they are also relocating their business and some of their existing Tenants to it. Synchronising completion at the end of October is important as is ensuring that the occupational tenants who are moving (with them) have documents."
He referred to his file note of 1 September, wherein he had listed notes he had made in a meeting recently with Lee Allen. Mr Carey said that he had dropped Lee a little email "to keep him happy" but he would like to move to generating leases, particularly for VIP Services and Creative Concepts. They were the tenants who were to occupy units within the sub-divided unit 1. It was said that Lee would "bounce back" within 24 hours. Mr Carey said that he would be grateful if Miss O'Callaghan could set about putting together the lease that the defendants could utilise for the two deals that had crystallised.
- On 7 September 2005 Sydney Mitchell, solicitors for the sellers of Packhorse Place, sent the defendant outstanding planning permissions. On 16 September the defendants responded, asking for confirmation whether consent number 96/0293 had been implemented, as it was said to be an outline consent. The letter enquired whether there was a detailed consent: see page 1078. Although bearing Mr Carey's name, he said in evidence (at day 5, pages 42 to 43) that the letter had, in fact, been written by Miss O'Callaghan.
- On 19 September 2005 National Westminster Bank instructed a firm of valuers, Kirkby & Diamond, to value Packhorse Place. The relevant valuer was Miss Jean Howe.
- On 20 September Sydney Mitchell wrote to the defendants saying that they were trying to ascertain whether the works authorised by consent 96/0293 had been implemented: see page 1087. On 21 September Sydney Mitchell wrote to the defendant saying that their client had told them that planning permission 96/0293 had been implemented, and they had obtained a copy of the enclosed planning permission number SB/TP/97/83/0831 (at page 1090). That planning consent related to the construction of unit 7, and it was condition 11 of that planning consent that prohibited parking on the land to the rear of the site. That fact was not immediately apparent to the defendant firm.
- On 21 September 2005 Kirkby & Diamond inspected Packhorse Place. On the following day, 22 September, the defendants asked Sydney Mitchell to which unit planning consent 97/0831 related: see page 1180. Sydney Mitchell responded on 26 September (at 1183) stating that planning consent 97/0831 related to unit 7.
- On 26 September 2005 (at 1184) Jean Howe sent an email to Dermot Carey stating that she was just putting together the valuation of Packhorse Place for the bank and commenting that the previous year she had valued it for another purchaser. She added that the title plan now seemed to be different. The previous year the ownership went out to the A5 both sides of the "main bit" of the fuel station. Now it seemed that the claimant was only getting rights of way over the frontage. She asked Mr Carey to double check that.
- On 27 September 2005 (at 1186) Helen O'Callaghan confirmed that the claimant was only getting rights of way over the frontage. On the same day, 27 September 2005 (at 1189), Jean Howe sent an email to Miss O'Callaghan, which was then forwarded to Lee Allen. Miss Howe said:
"It seems to me that AW are paying a very full price for the estate and are now not getting the potential benefits that were being offered for sale by the same vendor last year. I suggest that you ask the vendors solicitors to include the whole of the title, including the bits out to the road, as it does impact on value!"
- The email under which that was forwarded to Lee Allen, sent on behalf of Mr Carey, said:
"Lee, further to my earlier email please see below Jean's comments on value. Will you approach the Seller?"
- The Kirkby & Diamond report on Packhorse Place is dated 29 September 2005 and can be found at E/1092 through to 1157. A calculation showing how Miss Howe arrived at her capital value has recently been supplied, and can be found at 1197A. It is necessary for me to refer specifically to certain parts of the report.
- There are various photographs which, in the trial bundle, appear only in black and white. One shows the HGV parking area at 1095. At 1098, there is a photograph of what is described as "HGV parking area under construction". At 1099, a photograph of what is described as "newly cleared soil heap to form HGV parking". There is a plan at 1114 which shows 20 HGV parking spaces at the rear of the site, and two areas comprising in total a further 26 HGV parking spaces on the left-hand side of the site as seen from the A5.
- There is a schedule of tenancies at pages 1115 to 1120. Unit 1 is shown divided into three units: A, B and C. Unit 1A is to be let to Creative Concepts (Europe) Limited, unit 1C to Plasmakers Limited, and what is described as unit 1B (although in the event it became unit 1C) as let to AW Transport Limited. Unit 4 is shown as being let to AW Commercial Repairs Limited. Unit 5 is shown as being let to TG Tyres (Stevenage) Limited, although in the event it was let to AW Commercial Repairs Limited and that entity then allowed TG Tyres (Stevenage) Limited to occupy under a short-term arrangement. Unit 9, described as the pizza hut because of its shape, was to be let to AW Commercial Repairs Limited.
- The schedule concludes with a reference to HGV parking spaces. The tenant is described as "various haulier operators" and the term as "weekly licences". The area was said to comprise a total of 46 spaces, producing a rent of £114,816. The other lease terms were said to be "only right to park a HGV for a week or part thereof". The analysis was said to be £60 per week. The comments said:
"Rental income based on 80% occupancy rates (as present information from Lee Allen) (£143,520 by 80%) equals £114,816."
- There then follows the body of the report. At paragraph 2.3.2, the use is said to be "mixed". The predominant use of the surrounding land is said to be "mixed commercial and agricultural". A schedule of the accommodation is included at paragraph 4.1.1. Unit 1A is said to be "industrial/warehouse", unit 1B as "warehouse", unit 1C as "workshop", unit 4 as "vehicle repairs". At paragraph 4.7, it is said:
"On the refurbishment and splitting of the large unit 1, to facilitate the three occupiers, it would be necessary to provide disabled WC facilities within the units."
- At paragraph 5.5, it is said:
"To a certain extent the continued use of some of the building for commercial vehicle repairs, will mean that there is little point in complete decontamination and cleaning of the floors and structures but this is an issue that will need to be addressed in the near future."
- At paragraph 7.5, it is said:
"It is possible, that once the raised areas at the rear of the site are surfaced for HGV parking, that water run off may affect some of the buildings in occupation at the lower part of the site."
- At 8.4.1, in response to the question, "What is the current planning use of the Property (including Use Classes Order classification)?", the response was "B1/B2/B8". In answer to the question at 8.4.2, "Does the Property appear to comply with its planning permission?", the answer given is "Yes".
- At paragraph 8.9 Mr Carey has circled the information, which included reference to the estate being accessed via two rights of way. Mr Carey has written in the comment, "Sorting".
- The information at box 9.2 was also circled by Mr Carey, and he has added the comment, "Check". That comment was in relation to surface oil contamination. One of the tanks serving the fuel station, it was said, might be on the freehold on part of the land owned by the vendor or very close to the land that was to be sold. Immediately after that entry, there is the statement:
"A large amount of soil has been moved at the rear of the site from construction of unit 6, 7 and 8. This has now been moved and levelled to form the rear HGV parking area. Please see the photographs."
- At box 11.8, which has again been circled by Mr Carey, Miss Howe commented that she had not seen all of the leases and was reliant upon verbal information from Lee Allen regarding the nature of the new leases to be granted to the tenants, who were said to be taking leases from 28 October and 1 November 2005.
- Under the heading, "Market trends and general comments" (at paragraph 12.1), Miss Howe comments:
"As a wholly let estate, the property would be considered as a very good investment, on the auction market at the present time". There was said to be "a lack of industrial investments available in the Hertfordshire and Bedfordshire areas" and that was seen "with hardening yields achieved at auctions and in the private market sector."
- In relation to the volatility of the sector, Miss Howe commented at 12.2:
"As an industrial investment, the market was relatively buoyant, whilst stocks and shares are still recovering."
- At paragraph 12.3, relating to letting prospects, Miss Howe commented:
"As parts of the estate become vacant, it is clear that the owners, the AW Group, are well positioned within the haulage fraternity, to put lettings in place that would not necessarily be achieved through normal commercial Estate Agency."
- Miss Howe was satisfied that the "hands-on management" would ensure "a good level of occupancy on the estate into the future". She understood from Lee Allen that there were three tenants waiting for space as and when it should become available.
- At 12.4, Miss Howe referred to the fact that, apart from the splitting of unit 1, the only other development that was being undertaken was the levelling of the spare ground on the estate at present to be surfaced with hardcore to provide parking for HGV lorries. She said that in total 46 spaces would be provided. That work was said currently to be in hand, and was expected to be completed before 31 October 2005. It was said that the work would include the erection of palisade fencing around the estate and lorry park area in particular. That fencing was being reused from AW Group's present property.
- Within box 13.9, it was said by Miss Howe that she had assessed the HGV parking areas as having a value of £1 per square foot on a lease basis. It was understood that the freeholder, AW Group Limited, would operate the HGV parking and therefore no lease would actually be in place. At 14.5.1, in answer to the question, "In your opinion, are there any viable alternative uses for the property", Miss Howe answered, "None".
- In section 16, headed "Security for the loan", Miss Howe commented:
"The commercial strengths of the property as a security for a loan is that the purchasers have ready-made tenants to occupy all of the units on the estate and are maximising the potential use of the land for HGV parking, which is obviously a very profitable business."
It was said that the AW Group would operate the HGV parking business directly, whilst granting leases to their subsidiary companies at units 4 and 1B. As long as Russ and Lee Allen stayed involved with AW Group, the estate should stay reasonably well maintained with a high occupancy level. The estate would be saleable as a single lot, subject to six to eight leases. If it were to be sold, the HGV parking areas would need to be leased to AW Group. The likely purchasers at the end of the loan were said to be "investors, property companies, haulage companies and owner occupiers."
- On 30 September, Miss O'Callaghan sent an email to Lee Allen explaining that she had drafted leases to Creative Concepts and to VIP Services with B1 use and presumed that that was correct. Lee Allen responded to that email on 3 October (at page 1203) replying, "All correct".
- On 4 October 2005, a firm of solicitors known as Machins were instructed by National Westminster Bank in relation to both Packhorse Place and Dominion House. They sent an email to Mr Carey confirming those instructions. In a further email of 4 October, Machins's queries on behalf of National Westminster Bank included a request for confirmation that the leases on the units to be pre-let at Packhorse Place would be in place upon completion. That was the first time that that requirement of the bank had apparently been communicated to the defendants.
- On 5 October 2005, Paul Masters of RBS, the parent company of National Westminster Bank, sent an email to the defendant stating the writer's understanding that the Allens had not communicated with the defendant regarding the bank's requirements to enable the deals to go ahead.
- Between 5 October and 13 October, there were a series of communications between the defendant and Sydney Mitchell (the solicitors acting for the sellers of Packhorse Place) relating to the question whether the sale should be amended so as to include within its subject matter the two access routes over the filling station abutting the A5. Initially Mr Carey said that his understanding was that the whole of the land was to be sold; but it later became apparent, as appeared from Sydney Mitchell's letter of 12 October (at page 1319), that the sellers would only be prepared to include the access over the forecourt land if the claimant were prepared to increase its price for the property. The claimant was not prepared to do that, and that was addressed in a letter from the defendant to Sydney Mitchell of 13 October (at page 1321), and a letter from Miss O'Callaghan to Machins of 14 October 2005 (at page 1349).
- Mr Carey wrote a further memorandum to Miss O'Callaghan on 10 October 2005 (at page 1280). On 11 October 2005 (at page 1302) Miss O'Callaghan sent an email to Lee Allen noting references to leases proposed to be granted to AW Transport Limited, AW Commercial Repairs Limited, and TG Tyres (Stevenage) Limited in Jean Howe's valuation report. She commented that NatWest had asked whether these leases would be in place on completion and, if so, Lee was asked to let her have the details.
- Lee's response (at page 1309), by email of 11 October, was that TG Tyres' and AW's leases would not be in place when the claimant moved but within a month of the move they would have them in place. Lee Allen gave evidence about that at Day 4, pages 48 to 50.
- On 17 October 2005 (at pages 1361 to 1363), Machins wrote to the defendant stating that they were still awaiting certain important documents and information. Certain questions were said to arise on considering the valuation report issued by Kirkby & Diamond.
- Question three said that the valuation implied that unit 1 was to be split into three units and all would be let on or very shortly after completion. Machins said that the defendant had supplied draft leases for units 1A and 1B only. They inquired whether it was proposed imminently to let unit 1C and, if so, to please detail the stage reached in negotiations for the grant of a lease.
- Question four stated:
"The valuation indicates that the levelling of the spare ground at the rear to provide parking for HGV lorries is planned for completion by the end of this month. (a) Is it intended to let any part of this land on long-term arrangements? If not, how is it proposed to bring the park into profitable use? (b) Have planning permission and building regulation consent been obtained? If so, please copy these. But if not, on what basis are consents not necessary? (c) Please confirm your client will obtain and maintain all necessary consents for discharge in relation to such use. Please supply copies if already obtained."
- Question five said:
"The Valuation suggests that Unit 4 is to be let to one of your client's group companies but I have yet to see a complete or a draft Lease of this Unit. What is the current position please?"
- On 19 October 2005, the bank sent an email to Miss O'Callaghan stating that one of the conditions of the bank's advance had been that a minimum of £200,000 of leases at Packhorse Place Industrial Estate were to be pre-signed prior to completion. Miss O'Callaghan's email was said to indicate that that would not be the case and therefore the bank needed to discuss this with the defendant.
- Miss O'Callaghan's response, also on 19 October, was that she had subsequently spoken to Lee Allen, who had agreed that the leases relating to AW Transport and AW Commercial would be put in place by 31 October (i.e. the day of completion) to meet the bank's condition of support.
- On 20 October 2005, the defendant responded to Machins's inquiries. The response to question three was that Miss O'Callaghan understood that unit 1C would be let to AW Transport Limited for a term of six years at a rent of £19,905.
- Her response to question four was:
"I believe this work has been completed. I understand that my clients have merely levelled the land to reintegrate the land so that it can be used for parking. Therefore, no consents were necessary."
- Her answer to question five was:
"I will let you have a draft but it will be based on the same ones as VIP and Creative. It will be for a term of six years at a rent of £19,895."
- In response to question nine Miss O'Callaghan attached a copy of the pages from the valuation report showing the buildings on the estate and by whom they would be occupied. I take that to be a reference to either the plan at 1114 and/or the schedule of leases. Miss O'Callaghan indicated her understanding that the leases to AW Transport and AW Commercial would be put in place on completion.
- The defendant's case is that that letter was written following a meeting between Lee Allen and Miss O'Callaghan on 20 October. That is supported by the fact that on 20 October Miss O'Callaghan sent an email to Lee Allen which began:
"Further to our meeting, I understand from Paul Masters at RBS that you have agreed that the Leases to AW Transport and AW Commercial will be put in place on completion. I presume that the terms are as per Jean Howe's valuation. Could you please confirm so that I can draft the leases as soon as possible."
- After this dispute arose, on 7 November 2008, Miss O'Callaghan prepared a retrospective note of her meeting on or about 20 October 2005 with Lee Allen. In it she recorded that she had not made a note of her meeting at the time the meeting took place. Miss O'Callaghan now says that that note actually records a meeting that took place on 27 October: see paragraph 23 of Miss O'Callaghan's witness statement and her cross-examination on Day 6 at pages 9 to 11 and 13.
- What happened on 20 October is a matter which I will need to consider in chapter 4 relating to breach of duty. Miss O'Callaghan's evidence is at paragraph 17 of her witness statement. She dealt with it in-chief at Day 5, pages 129 to 133 and in cross-examination at pages 168 to 188, especially page 174. Lee Allen dealt with the matter at paragraph 31 of his witness statement and Day 4, pages 58 to 62 and 69 to 70.
- On Friday 21 October, Miss O'Callaghan wrote to Machins stating that she was instructed that leases of units 1C and 4 to AW Transport would be put in place on completion, as would the leases of unit 5 and unit 9, which would be granted to AW Commercial Repairs Limited. The terms of the leases were said to be as per the schedule in the valuation report, and Miss O'Callaghan was said to be in the process of drafting them. Miss O'Callaghan recorded that she would only be in the office on Thursday of the following week (that is to say 27 October), and if Machins needed assistance, then they were pleased to speak to Patricia Kempson.
- On 26 October (at 1445) the bank emailed Dermot Carey to say that the outstanding issues included leases. A minimum of £200,000 of leases at Packhorse Industrial Estate were to be pre-signed prior to completion. The bank was said to be awaiting a schedule and confirmation in that respect. Mr Carey was asked to forward the email to Helen O'Callaghan for her information.
- In an email from Lee Allen to Dermot Carey on 26 October, at about 3.50 in the afternoon, Lee Allen informed Mr Carey that he would be with Helen O'Callaghan the following morning at 11 o'clock. If necessary, he would, as he put it, run back up the road and "slap them" (i.e. the bank) again.
- It is the defendant's case that a meeting took place between Lee Allen and Helen O'Callaghan on 27 October. I have already referred to the fact that Miss O'Callaghan made (in November 2008) a retrospective note of that meeting (which is at page 1405), although she now says that she was in error when she described in the note that the meeting had taken place on 20 October.
- The note records that Miss O'Callaghan had a meeting with Lee Allen to review final points on Packhorse Place, including the planning situation on Packhorse Place and plans for new leases to be granted. It records that she ran through the planning situation on Packhorse Place, confirming a mix of planning, and that "only B8 use was limited to unit 7, the rest being light industrial". She records that her understanding was that the property was to be an investment property. She referred to the fact that, in a letter from Dermot Carey to Russ and Lee Allen on 1 September, Mr Carey had stated that they would be transferring their business from Chaul End Lane to Packhorse Place. Miss O'Callaghan says that she understood that to mean the business of letting units.
- She makes reference to the point raised by Mr Beeley of Machins in his letter of 17 October about the levelling of the spare ground to the rear of the site to provide parking for HGV lorries. She says that she responded to that inquiry, after having spoken to Lee, that the work had been completed and that the claimant had made "the level land to reintegrate the land" so that it could be used for parking and that "no consents were necessary". She records that she was instructed by Lee to draft various leases to AW companies "as before completion" to satisfy the bank. She records that her understanding from speaking to Lee was that these were just "bare" leases granted just to give comfort to the bank.
- Miss O'Callaghan's evidence about the meeting of 27 October is to be found at paragraph 23 of her witness statement and in cross-examination at Day 6, pages 9 to 11, especially page 10. Lee Allen's evidence is to be found in his witness statement at paragraphs 33 to 35 and Day 4, pages 71 to 76.
- On 28 October 2005, the claimant entered into a licence to remove plant and equipment from Chaul End with the purchaser, Helical Retail (Luton) Limited. The access period was from (and including) the date of the licence to (and including) 21 November 2005. The equipment was described as the "content of the office, warehouse and storage area on the Property and paraphernalia related to AW and its haulage business". The performance deposit was said to be £1 million plus VAT. The performance condition was said to be the giving by AW of vacant possession of the property to the owner.
- By clause 4.6, if the performance condition was not satisfied by 21 November 2005, the owner's solicitor was to be entitled to release to the owner on written request by the owner all costs, expenses and losses incurred by the owner as a result of the failure by AW to give vacant possession of the property on or before 21 November 2005, and AW was to have no further claim to that part of the performance so released.
- By clause 4.7, if the performance condition was not satisfied within two weeks of 21 November 2005, that is to say by 5 December 2005, then the owner's solicitors were to be entitled to release £500,000 out of the performance bond, with all interest accrued on it, to the owner, and AW was to have no further claim to that part of the performance bond so released.
- The sale of Chaul End completed on 28 October 2005. The purchase of Dominion House completed on 31 October 2005. On the same day, the defendant received £922,000 from National Westminster Bank by way of advance. On the 2nd or 3 November 2005, simultaneous exchange and completion on the purchase of Packhorse Place took place. On 22 November 2005, vacant possession was given at Chaul End.
- I have already related that planning difficulties first emerged on 8 May 2006 when the Local Planning Authority wrote to AW Transport alleging non-compliance with condition 8 of planning consent 03/1809 relating to delivery hours. I have already related the correspondence that followed on from that.
- It was only on 25 July 2006 that South Bedfordshire District Council wrote for the first time (at page 1999) alleging a planning contravention in the form of unauthorised engineering works to construct a hard standing for HGVs at the rear of unit 7, Packhorse Place. The contravention notice was issued on 31 August 2006.
- On 6 September, Mr Carey sent a letter by email to Lee Allen at AW Transport. His email began:
"I should just record for your benefit and mine that when you, Russ and I met to discuss the 'nosing around' of the planners and their misguided enquiries about one or two of the units, it was clear to me that there was what I know as 'a potential conflict of interest'. From this I mean that Russ's recollection that Helen had confirmed that the estate had a wholly B8 user and Helen's recollection that this related only to part and that we were acquiring the estate 'as is'.
"I did say to you at the time and I should repeat it now, in that respect that it is my obligation to advise you that if you feel there is an issue or that your understanding of the advice received from TW in any respect in connection with the acquisition of Packhorse Place is different from the ambit of our instructions to acquire Packhorse Place that you should seek independent legal advice, and I would again repeat this."
- Mr Carey then goes on to deal with the planning issues. He suggests that there should be a planning application to regularise the engineering works that the claimant had carried out to create the hard standing. In the light of the past inquiries by South Bedfordshire District Council, and the letters they had written, Mr Carey suggested that if the claimant were minded to regularise the position, the application should be lodged by a professional planning consultant on the claimant's behalf.
- Following on from that letter, on 11 September the matter was referred to DLA Town Planning Limited: see pages 2019 to 2021. On 9 November 2006 (at page 2029) DLA Town Planning Limited advised on the prospects of obtaining retrospective planning permission. The writer said that he considered that a more detailed investigation was required to check the exact conditions attached to each planning permission; that would provide an overview of the permissions on the site and how that affected the parking of vehicles and whether there were any limits on hours of use.
- On 12 January 2007, having completed a detailed study of the planning permissions as existed on site, DLA Town Planning Limited considered that the best solution would be to submit a retrospective planning application. This was done in late March or early April of 2007. However, the application was rejected by the council on 6 July. An Enforcement Notice was issued on 5 November 2007. On 14 November 2007, DLA Town Planning Limited advised that they considered the appeal had a 50 per cent chance of success; but they went on to add that the appeal would provide extra time in that the appeals process could take some time. Furthermore, more time could be granted to find an alternative site and to return the hard standing to its previous condition. It was at about this time that, as I have mentioned, on 21 November 2007 AW Transport entered into creditors' voluntary liquidation. Cross-examination on the financial position of that company and AW Commercial Repairs Limited can be found at Day 3, pages 12 to 17.
- The claimant appealed against the Enforcement Notice, and its submissions on the appeal can be found at pages 2157 through to 2199. Following a hearing on 15 July 2008, the appeal was dismissed. Following the dismissal of the appeal, on 14 October 2008 Mr Carey wrote to Russell Allen again at the incorrectly named Luton Truck Stop Limited.
- At page 2232, the letter included the following:
"As previously said, Helen's recollection, when you purchased the site, was that the site had mixed use, being B1, B2 and B8. Indeed, we were not aware that you were clearing the land at the rear of the estate to create hard standing until after the work had been done.
In addition, both mine and Helen's understanding is that we were instructed to acquire a mixed use industrial estate and we were not aware that you were going to use part of the site for deliveries and distributions.
Accordingly, whilst I sympathise that your appeal has been dismissed, I feel that this may be down to the misunderstanding between yourself and Helen and not down to any negligence on the part of Helen or this firm."
- On 27 October 2008, Mr Carey wrote again to Russell Allen, and also Lee Allen, at Luton Truck Stop Limited: see pages 2233 and 2234. In the course of his letter, Mr Carey said this:
"Guys, I have to be very clear here so there is no doubt. My firm is not at fault for any advice in this area. It was not an area on which our advice was sought or given."
- Later in his letter, he emphasised again that this setback for the claimant was not as a result of any advice that the defendant had given or had not given and therefore he needed to make that clear. Again, as he had repeatedly mentioned, if the claimant had concerns with that, then he would urge them to seek independent legal advice.
- The letter concluded as follows:
"Our advice, borne out by the valuation by Kirkby & Diamond for the Bank when you bought the site was that the site had mixed use, being B1, B2 and B8; we were not aware that you were clearing the land at the rear of the estate to create hard standing until after the work had been done and I have to stress that this work was not carried out with or under our advice as to the planning aspects. My advice, Russ, is to comply with the decision unless DLA Planning can give you any alternate route to proceed.
"Can I emphasise that I really do sympathise with you over the dismissal of the appeal but I must stress that this is not attributable to any negligence on the part of this firm or in our advice tendered to you."
- Later, on 5 February 2009, AW Commercial Repairs Limited entered into creditors' voluntary liquidation. Cross-examination on the accounts of that company can be found at Day 3, pages 17 to 19. As I have mentioned, these proceedings were ultimately issued on 29 September 2011.
- That concludes the chronology relating to the purchase of Packhorse Place. It is now 12.55. I am about to move on to chapter 3, relating to the trial, so I think that will be a convenient point to break off for lunch.
- We will resume at 2 o'clock.
(The short adjournment)
JUDGE HODGE QC:
Chapter 3: The trial.
- The trial began at 2 o'clock on Monday 15 July after I had taken the morning up in pre-reading of the skeleton arguments and the documents referred to therein.
- On the afternoon of day 1, after hearing argument from counsel appearing for the parties, Mr Geraint Jones leading Miss Laura McGinty for the claimants (instructed under the Direct Public Access Scheme) and Mr Neil Hext for the defendant (instructed by Bond Dickinson), I delivered an extemporary ruling. I admitted, without opposition from the defendants, the second witness statement of Russell Allen dated 15 July 2013. I admitted the first supplemental report of Miss Lindsey Lock of Aitchison Raffety, the defendant's expert valuer, dated 5 July 2013. That report incorporated a report of Mr Gareth John Morgan also of Aitchison Raffety dated 2 July 2013 directed to the number of potential HGV parking spaces at Packhorse Place. Finally, I acceded to Mr Jones's application for a brief adjournment of the trial to 2 o'clock the following day to enable him to get up to speed on the case. As to that, the claimant had until the 28 June 2013, or thereabouts, retained the firm of Lester Aldridge as its solicitors under the terms of a conditional fee argument. On 28 June Lester Aldridge had given notice of termination of the conditional fee agreement and the after-the-event insurance policy. Mr Jones had not previously been engaged in the litigation, although he had given some advice on planning issues some years previously. Mr Jones needed, with Miss McGinty's assistance, some time to get up to speed on the case. Given that Mr Carey was not going to be available to give evidence the following week, I was only able to allow Mr Jones until 2 o'clock on day 2 of the trial (Tuesday 16 July) to engage in that exercise.
- On the afternoon of day 2 I gave permission to the claimant to amend the particulars of claim. That application had not been opposed by the defendants. I also acceded to a joint request by both parties' counsel for expert evidence to be given sequentially, rather than concurrently, in accordance with paragraph 11 of Practice Direction 35.
- Mr Jones then briefly opened the case for the claimant and I then heard some of the evidence from Mr Russell Allen. He gave evidence from just after 3 o'clock until the court rose at 4.20 pm on day 2; and his evidence continued on day 3 until about 3.40 in the afternoon. In total, Mr Russell Allen gave evidence for about 5 hours and 15 minutes. Mr Lee Allen then began his evidence, at about 3.55 pm on day 3; and his evidence continued until just before 2.20 pm on the following day, Thursday 18 July, day 4 of the trial.
- I should explain that Mr Russell Allen is now the sole director of the claimant company and its ultimate shareholder. He had also been the managing director of the company and the other companies within the AW Group in 2005. Mr Russell Allen is 63 years of age. Mr Lee Allen is his son. He is 41 years of age. He was, until 1 May 2009, also a director of the claimant company. He was the individual with direct responsibility for the road transport part of the claimant's business. He has now left the haulage business and is an internship manager with the University of Bedfordshire and a rugby coach.
- After Mr Lee Allen had concluded his evidence, which occupied in total about 3 hours and 25 minutes, I heard from Mr Grant Franklin from just before 2.20 pm until just after 3 o'clock on the afternoon of day 4. Mr Franklin is a chartered accountant and the managing partner of Hillier Hopkins LLP, who had acted as the claimant's accountants, and also the accountants for the other group companies, at all material times. Finally for the claimant I heard from Mr Paul Alan Jessop. He is a surveyor and a director of Lambert Smith Hampton who had been involved in the purchase of Packhorse Place. He gave evidence for about 25 minutes on the afternoon of day 4.
- After a short break the defendant's evidence commenced. I was invited to treat as read a short witness statement from Mr Gary Oldroyd, a solicitor with the defendant's solicitors, Bond Dickinson, dated 9 July 2013.
- Mr Dermot Carey, the managing partner of the defendant firm of solicitors and the former head of its commercial real estates department, was then called to give evidence. He gave evidence for about 50 minutes on the afternoon of day 4 and continuing until just after 2.45 pm on the afternoon of day 5, Friday 19 July. In total Mr Carey was in the witness box for about 3 hours and 50 minutes.
- At about 2.55 pm until about 4.30 pm on the afternoon of day 5 I heard evidence from Miss Helen O'Callaghan. She is a commercial conveyancing solicitor with the defendant firm and had qualified in 1996. Mr Carey was some nine years her senior, having qualified in 1987. Miss O'Callaghan's evidence continued on the morning of day 6 of the trial, Monday 22 July. Her evidence concluded at about 10.40 am, the court having sat early that morning at 10 o'clock. In total Miss O'Callaghan was in the witness box for about 2 hours 10 minutes.
- The remainder of day 6 was taken up with expert evidence. I heard first from the claimant's expert, Mr Christopher Godfrey Honeywill of Edward Symmons. He had made a report dated 7 June and, in response to Miss Lock's supplemental report, Mr Honeywill had made a further report dated 17 July 2013. He was in the witness box for about 3 hours and 15 minutes, of which some 35 minutes represented examination-in-chief.
- I then heard from Mr Morgan for the defendants. His report had been annexed to that of Miss Lock. He gave evidence for about 50 minutes.
- Miss Lock's evidence began at just after 3.50 pm on the afternoon of day 6 and we adjourned at about 4.35 pm that afternoon. Miss Lock gave further evidence on the morning of day 7 (Tuesday 23 July) for a further hour, and so she was in the witness box for about 1 hour and 45 minutes in total. Before giving evidence, Miss Lock had produced a second supplemental report dated 17 July 2013. Prior to Miss Lock's second report of 5 July, Miss Lock had met with Mr Honeywill, and they had produced a helpful joint statement dated 2 July 2013 which appears at pages 270 to 285 of the trial bundle.
- After Miss Lock's evidence concluded at about 11 o'clock on the morning of day 7 I allowed a short break before closing speeches. Mr Jones addressed me both before and after the short adjournment for about an hour and 20 minutes; Mr Hext, for the defendants, responded for about an hour and 50 minutes; and Mr Jones then replied for about 20 minutes. The court adjourned at 4.30 pm on Tuesday 23 July for me to prepare this oral judgment, which I am delivering today, Monday 29 July.
- At this point in my judgment it is appropriate for me to set out my assessment of the witnesses.
- In his oral closing, Mr Hext submitted that there were inconsistencies between the evidence of Russell Allen and Lee Allen at trial and what they had said when attempting to obtain the necessary planning consents for Packhorse Place between 2006 and 2008. The evidence of Russell and Lee was said to be dangerous because they were said not to have a clear recollection of what had happened at the time of the purchase of Packhorse Place. They were said to have had a tendency to disagree with any proposition which they thought would cause harm to their case. They were said to have forgotten incidents which must have happened, such as Lee Allen's involvement in the £140,000 deposit, and also in the negotiations over financing with National Westminster Bank in October 2005. It was also said that Lee Allen's evidence that the reason why the leases to the AW companies would not be put in place by the time of completion was because Miss O'Callaghan had not drafted them had been made up by him in the witness box.
- I accept that those criticisms of the evidence of Russell and Lee Allen are merited. I do not consider that they were deliberately, and consciously, lying in evidence; but, in my judgment, their evidence was unreliable. I found both of them to be more concerned to promote the claimant's case than to give an accurate account of actual events, and of their likely actions had they been alerted to the true planning position in relation to Packhorse Place.
- Whilst, as will appear, I have misgivings about Mr Carey's evidence generally, I do accept his assessment of Russell (at day 5, page 100) as "a man who knows his own mind". That was borne out by his acceptance of the seller's amendment to the terms of the deposit document at page 914. I also accept Mr Carey's earlier assessment of Russell Allen at day 5, page 10. There Mr Carey said:
"Russell is a genial guy, a very pleasant individual. He has built a successful business. I would always have believed that Russ would have read anything he had received from his solicitors and, you know, I am sure over the years if something had popped up on a commercial point he would have rung me back and asked about it. The portrait, perhaps, that has been painted this week is not one I am that familiar with but I would put him in the class of clients who -- there is a spectrum, I suppose and I have said in my witness statement, I think some clients will go off and issue non-refundable deposits and will not necessarily come back and track you through for advice. I would not say that Russ is the most detailed individual I have ever come across, but I think he is sharp and shrewd and quite sophisticated."
- As I say, I accept that assessment of Russell Allen. Having closely observed him during the course of over five hours of evidence, I consider that he was seeking to promote the claimant's case rather than doing his best to provide his true recollection of relevant events. At times he was over emphatic in his evidence, and on one occasion he was even facetious. That was at day 3, page 86. Russell Allen was asked by Mr Hext:
"Question: Let us imagine for a moment that your lawyer advised you that you would not be able to get that money back. That would be quite a big problem, would it not, for you?
"Answer: Not such a problem as the next question, but carry on."
- I find Lee Allen to have been an unsatisfactory witness in several respects. First, he wrongly distanced himself from any involvement in the £140,000 deposit: see his witness statement paragraph 18 and day 3, pages 186 to 190. Secondly, the evidence that he gave at paragraph 31 of his witness statement, which he supported at day 4, pages 158 to 161, to the effect that he personally never discussed the levelling work at the rear of the site with Miss O'Callaghan, must be incorrect. The information in Miss O'Callaghan's letter of 20 October cannot have come from her and must have come, and I find did come, from Lee Allen.
- Thirdly, Lee Allen said that he "never got involved with the bank side": see day 4, page 23. Later he said that he had spoken to the bank but that he had never negotiated with them: see day 4, page 46. In my judgment, that cannot stand with the document of 19 October at page 1371 where Paul Masters of the bank, in an email to Miss O'Callaghan, said that he had subsequently spoken to Lee Allen who had agreed that the leases to AW Transport and AW Commercial Repairs would be put in place by 31 October in order to meet the bank's conditions of support; nor can it be reconciled with what Lee Allen himself said in his email to Dermot Carey of 26 October (at 1450) where Lee said that he was meeting with Helen O'Callaghan the next morning at 11 o'clock so, if he needed to, he (Lee Allen) would run back up the road and "slap" the bank again.
- Fourthly, Lee Allen's evidence about the reason why the leases to the two AW companies would not be in place at completion was not satisfactory. At day 4, pages 49 to 50 Lee Allen was asked why was it that those leases would not be in place and his answer was:
"Because she [Miss O'Callaghan] had not done them….they had not been done so they won't be in place."
I simply cannot accept that evidence as satisfactory.
- Fifthly, at day 4, pages 88 to 89 Lee Allen acknowledged that there had been an element of "over-egging the pudding" in order for the claimant to try to get planning consent in February 2008 when it was appealing against the enforcement notice. Sixthly, I find that Lee Allen on occasions tried to anticipate the direction of Mr Hext's questioning rather than giving straight answers to those questions. An example can be found at day 4, page 35.
- I am satisfied, for these reasons, that I must scrutinise the evidence of both Russell and Lee Allen with care, and that I cannot accept what they say at face value.
- Mr Hext submitted that, by contrast, the defendant's witnesses were careful, honest, and made appropriate concessions. Where their evidence was inconsistent with that of Russell and Lee Allen, Mr Hext invited me to prefer the evidence of the defendant's witnesses. I reject that submission.
- I found Mr Carey to be a distinctly unsatisfactory witness. He was very much concerned to justify the actions of himself and his firm, and to exculpate the defendant from any responsibility for the failure to establish, or advise, as to the actual planning position. This was apparent both from his correspondence after the problem first surfaced, in May 2006 and through to October 2008, and also in his evidence at trial. This tendency was made explicit at day 5, page 34; but I find that it also permeated the whole of Mr Carey's evidence at trial: see, for example, day 5, pages 47 through to 68, pages 76 to 79 and page 88. Mr Carey was clearly impatient with certain of Mr Jones's questions in cross-examination: see, for example, day 5, page 118.
- Mr Carey's witness statement at paragraph 39 was clearly inaccurate, and materially so, as to the origins of his firm's receipt of the Kirkby & Diamond report. At paragraph 39 of his witness statement, Mr Carey had said that the file did not record exactly when he received the Kirkby & Diamond report or from whom. At the end of his questioning, I drew attention to the compliments slip at page 1247, which clearly showed that the report had been sent by the bank to the defendant after a discussion between Hazel Simpson of the bank and Mr Carey. Those questions can be found at day 5, pages 123 to 127. I am satisfied that in his evidence, Dermot Carey has deliberately underplayed the importance of this report, which, in his own memorandum to Helen O'Callaghan of 10 October (at page 1273), Mr Dermot Carey had described as "quite a useful report". Although I do not consider Mr Carey to have been deliberately dishonest in his evidence, I do regard that evidence as partisan, self-serving and unreliable.
- Helen O'Callaghan was trying to be honest in her evidence and to assist the court. But she was clearly disadvantaged by her lack of attendance notes. She also clearly had little real recollection of events at the time of the purchase in the period up to exchange and completion of the purchase of Packhorse Place up to 2 or 3 November 2005. Even in Miss O'Callaghan's November 2008 retrospective attendance note she was unable to distinguish her recollection of events on 20 and 27 October 2005. I find that Miss O'Callaghan's approach at the time of this transaction was entirely reactive to the information provided to her, rather than proactive in taking steps to seek out relevant information and evaluate material facts.
- As with Russell and Lee Allen, I find that I cannot regard the evidence of either Mr Carey or Miss O'Callaghan as necessarily constituting a reliable guide to the truth.
Chapter 4: Breach of duty.
- The claimant's case on breach of duty is set out at paragraph 39 of the amended particulars of claim. It is said that the defendant acted in breach of duty and was negligent in the conduct of conveyancing in connection with the purchase of Packhorse Place in the following respects:
(1) The defendant was aware of the intended use of Packhorse Place by the claimant. In so far as the defendant was unaware, the defendant failed to take adequate instructions from the claimant in relation to its intended future use of Packhorse Place and in respect of its intentions as regards any alterations to that property.
(2) The defendant failed to advise the claimant on the planning position in relation to Packhorse Place. The defendant should have, but did not, advise the claimant of relevant matters. Further, the defendant ought to have, but did not, advise the claimant that it had no planning permission to park HGVs at Packhorse Place or to use the site as a road haulage depot or to operate a commercial vehicle repair workshop there. Further, the defendant ought to have, but did not, advise the claimant as to the conditions attached to planning permission 97/0831 and planning permission 03/1809.
(3) The defendant failed to advise the claimant that it would need to apply for planning permission to park HGVs, to use the site as a road haulage depot, or to operate a commercial vehicle repair workshop at Packhorse Place.
(4) The defendant failed to advise the claimant that it would be likely to face significant difficulties in obtaining such planning permissions and that it would be advisable to seek detailed planning advice.
(5) The defendant failed to advise the claimant of the significance of the land being in the Green Belt and in an Area of Outstanding Natural Beauty and in an area of Designated Landscape Value in that it would render it more difficult for the claimant to obtain planning permissions in respect of Packhorse Place in the future.
(6) The defendant failed to provide the claimant with an adequate Report on Title in that the Report on Title failed to deal adequately or at all with the planning issues raised by Packhorse Place and in that it failed to draw attention to the adverse entries in the planning permissions and falsely stated that there no adverse entries.
(7) The defendant failed to provide accurate information about the planning position in its letter to Machins of 20 October 2005.
(8) The defendant failed to point out to Kirkby & Diamond and Machins and the claimant the errors in the planning position as stated in the Kirkby & Diamond report.
(9) The defendant failed to give accurate advice to the claimant as to the planning position as pleaded in response to the telephone call of Lee Allen in late August/early September 2005.
(10) The defendant failed to explain to the claimant the terms of the contract into which the claimant was entering and, in particular, failed to explain to the claimant that by virtue of clause 14 of the contract the claimant was undertaking to carry out its own investigations into the planning position.
- Those allegations are addressed at paragraph 42 of the defence, where they are all denied. It is said that the defendant was not aware of any intended use of Packhorse Place, other than the use to which it was being put prior to its purchase. It is further denied that the defendant ought to have made further inquiry of the claimant than it did. It is said that the advice that the defendant gave was sufficient. It is said that the defendant was not on notice that the claimant intended to use Packhorse Place to park HGVs or as a road haulage depot or to operate a commercial vehicle repair workshop. It is said that it was not within the scope of the defendant's duty to advise the claimant that it would be likely to face significant difficulties in obtaining planning permission, and that it would be advisable to seek detailed planning advice. Likewise, it is denied that the defendant was under any duty to advise the claimant as to the significance of the land being in the Green Belt and in an area of Outstanding Natural Beauty and in an area of Designated Landscape Value. It is said that the Report on Title was sufficient. It is also said that the defendant had no duty to the bank to give any advice: whether it gave any information to the bank would have depended upon the instructions it received from the claimant.
- In his written closing Mr Jones and Miss McGinty for the claimants submitted as follows:
(1) That a solicitor owes his client a duty of care in both contract and in the tort of negligence to exercise reasonable skill, care and diligence in relation to the work he undertakes. The extent of a solicitor's responsibilities is derived from his retainer. It is right that he is under no general obligation to expend time and effort on issues outside the scope of his retainer. But if, in the course of doing that for which he is retained, a solicitor becomes aware of a risk, or a potential risk, to his client which it is reasonable to assume the client did not know about it is the solicitor's duty to inform the client.
(2) That the standard expected of a solicitor in the performance of this duty is to be assessed against the reasonably competent practitioner having regard to the standards normally adopted in his profession.
(3) That a solicitor who does not follow the guidance contained within the Law Society's Conveyancing Handbook and, in particular, paragraphs 24.3.2, 24.3.3, and 24.3.4 of the 12th edition (published in 2004), is not exercising reasonable care. It is no excuse for a solicitor to say that he did not know his client's intentions; it is up to him to find out. It is the duty of a solicitor to ask the client appropriate questions designed to ensure that the solicitor is aware of the client's relevant circumstances and intentions, and that the client has all the relevant information and does understand the legal consequences.
(4) That the defendant owed the claimant a duty of care to investigate the title of Packhorse Place and, in particular, to investigate the planning position. The claimant does not suggest that the defendant was under a duty to provide detailed planning advice; merely that his duty was to inform the claimant of the planning position so that the claimant could seek specialist advice if necessary.
- I accept those submissions. There are two relevant authorities. The first is the case of County Personnel Limited v Alan R Pulver & Co Limited  1 WLR 916, a decision of the Court of Appeal. The headnote records that in exercising reasonable professional judgment, a solicitor is expected to be alert to risks which might elude an intelligent layman and to advise the client of those risks or explore the matter further.
- The matter was addressed in the judgment of Lord Justice Bingham at page 922 between letters D and F:
"It seems obvious that legal advice, like any other communication, should be in terms appropriate to the comprehension and experience of the particular recipient. It is also, I think, clear that in a situation such as this the professional man does not necessarily discharge his duty by spelling out what is obvious. The client is entitled to expect the exercise of a reasonable professional judgment. That is why the client seeks advice from the professional man in the first place. If in the exercise of a reasonable professional judgment a solicitor is or should be alerted to risks which might elude even an intelligent layman than plainly it is his duty to advise the client of these risks or explore the matter further."
- At page 924, letter B, Lord Justice Bingham said that he regarded the instant case as a classic case in which the professional legal adviser was bound to warn his client of risks which should have been apparent to him but would, on a simple reading of the clause in question in that case, have been most unlikely to occur to the claimant.
- The second relevant authority is the decision of Mr Justice Laddie in the case of Credit Lyonnais SA v Russell Jones & Walker  EWHC 1310 reported at  PNLR 2. The headnote records that a solicitor is under no general obligation to expend time and effort on issues outside his retainer. However, if, in the course of doing that for which he was retained, he became aware of a risk or a potential risk to the client, it was his duty to inform the client.
- At paragraph 23 Mr Justice Laddie cited from the judgment of Lord Justice Lawton in the case of Boyce v Rendells (1983) 268 EG 268:
"…if in the course of taking instructions, a professional man like a land agent or a solicitor learns of facts which reveal to him as a professional man the existence of obvious risks, then he should do more than merely advise within the strict limits of his retainer. He should call attention to and advise upon the risks."
- At paragraph 24 Mr Justice Laddie cited the judgment of Lord Justice Bingham in Mortgage Express Limited v Bowerman & Partners  1 All ER 836:
"A client cannot expect a solicitor to undertake work he has not asked him to do, and will not wish to pay him for such work. But if in the course of doing the work he is instructed to do the solicitor comes into possession of information which is not confidential and which is clearly of potential significance to the client, I think that the client would reasonably expect the solicitor to pass it on and feel understandably aggrieved if he did not."
- At paragraph 28 Mr Justice Laddie said this:
"The solicitor only has to expend time and effort in what he been engaged to do and for which the client has agreed to pay. He is under no general obligation to expend time and effort on issues outside the retainer. However, if, in the course of doing that for which he is retained, he becomes aware of a risk or a potential risk to the client, it is his duty to inform the client. In doing that he is neither going beyond the scope of his instructions nor is he doing 'extra' work for which he is not to be paid. He is simply reporting back to the client on issues of concern which he learns of as a result of, and in the course of, carrying out his express instructions."
- Mr Hext submitted in closing that when the defendant was first instructed there was no clear intention to transfer businesses across to the new properties. Mr Hext supports that by the various considerations he identifies at paragraph 1 of the note of his final submissions on behalf of the defendant. I reject that submission.
- I accept that by 2005 the transport business was in decline. At day 3, page 20, Russell Allen said that the transport business had been going down for years, slowly, in decline although he added that it was still a good viable business that he (Russell Allen) needed. I find that AW Transport in particular was making heavy losses: see the cross-examination about the accounts at day 3, pages 12 to 17.
- In his closing submissions in reply Mr Jones sought to show that AW Transport and AW Commercial Repairs were useful companies which were making a valuable contribution to the financial well-being of the AW Group as a whole; but my analysis of the accounts, until abbreviated accounts were introduced with effect from the year ending 31 July 2005 when it becomes impossible to pursue the point, is that AW Commercial Repairs was supporting AW Transport to the extent of £60,000 a year in management fees, and that without this support the financial position of AW Transport would have been even more desperate. I reject what Russell Allen said, that it was still a good viable business that he needed.
- Despite all that, however, I accept that the need to be able to take advantage of roll-over relief meant that the claimant perceived there to be a real need to transfer as much of the claimant's business as it could to new premises acquired out of the sale proceeds of Chaul End. Even if I accept Mr Carey's evidence that he was not present at any discussions about the need, and the requirements, for securing roll-over relief, Mr Franklin's evidence, which I accept, is corroborative of the evidence of Russell and Lee Allen on this matter.
- I accept that even by 6 October, Miss O'Callaghan had still not been told that unit 1 was to be split into more than two separate units of occupation, with one of them to be occupied by an AW Group company. However, I find that there was always an intention on the claimant's part to transfer its businesses to Packhorse Place.
- I am prepared to accept Mr Hext's submission that the requirement for formal leases - and I stress 'formal' - to the AW companies was only created in response to pressure from the bank for a minimum annual rental of £200,000 from pre-lets on the site; but I reject the further submission that there was no prior intention on the part of the claimant for AW companies to occupy parts of Packhorse Place. Lambert Smith Hampton's details of Packhorse Place (at page 860) confirm its potential for owner occupation.
- I reject Mr Hext's submission that the plan at page 1114, taken together with the schedule of tenancies at pages 1115 and following, does not fit with an intention to bring a haulage business on to the Packhorse Place site because there simply would not be space for the vehicles. The HGV spaces shown on 1114 included the spaces for parking AWT's HGVs. Either (1) Jean Howe misunderstood what Lee Allen was telling her or (2) Lee Allen was again "over-egging the pudding" in exaggerating the space available for HGV contract parking. However, I do accept Lee Allen's evidence (at day 4, pages 84 to 86) that at that time, up to completion of the purchase of Packhorse Place, the claimant had not even looked at the option of HGV parking in area C on the plan that was prepared by the experts at page 285H.
- I find that Mr Carey knew that the claimant was intending to transfer its business to Packhorse Place: see his letter of 1 September at 1034. It is clear from Mr Carey's memorandum of 5 September to Miss O'Callaghan (at page 1041) that Mr Carey appreciated that the business and also some of its existing tenants were to be transferred to Packhorse place. Paragraph 3 of Mr Carey's witness statement shows that he knew that the claimant's existing business included repairs.
- I reject Mr Carey's evidence at day 5, pages 21 to 22, that he believed that the reference to relocating the claimant's "business" was confined to relocating the existing tenants. In any event, in answer to questions from the bench (day 5, page 97), Mr Carey accepted that he was never told that AW Transport and AW Commercial Repairs were not going to occupy Packhorse Place. If he did not inquire, it was because Mr Carey failed to clarify the entire purpose of the purchase and the scope of his instructions.
- I accept the closing submissions of Mr Jones that the defendant was aware of the claimant's intentions for the Packhorse Place site prior to completion in November 2005 and/or that the defendant failed to take adequate instructions in this regard.
- I accept Mr Jones's further submission (at paragraph 4 of his written closing) that the defendant should have been well aware of the claimant's intended use of Packhorse Place given the various factors there identified.
- I also accept Mr Jones's submission that if the defendant were in any doubt, it was its responsibility to make those enquiries in line with the guidance given in the Law Society Conveyancing Handbook. Miss O'Callaghan accepted, when questioned, that neither she nor Dermot Carey had questioned the claimant as to its proposed use of the site: see day 6 at pages 12 to 13.
- I also accept Mr Jones's submission that the defendant failed to ask appropriate questions of the claimant as to its use of the land after having been alerted to the HGV parking in the Kirkby & Diamond valuation report and in the Machins's letter of 17 October 2005.
- I accept the submission that a properly asked question would have elicited a clear answer from Lee Allen as to the claimant's plans to operate HGV parking at the rear of the site. Given that he was so open in discussing the matter with Jean Howe, who was the bank's valuer, it is plain that this was not a matter which he was intending either to conceal or to minimise.
- I accept the account of Russell Allen as to the telephone conversation with Miss O'Callaghan in late August/early September 2005. According to Russell Allen (at paragraph 41 of his witness statement) Lee asked Helen O'Callaghan whether the notice they had found affected anything and whether they were all right to carry on with the purchase of the site. That is rather less specific than what Lee Allen relates at paragraph 21 of his witness statement. There Lee Allen says that he read the notice out to Miss O'Callaghan word for word and asked her to confirm, given the content of the notice, that AW Group would definitely be able to run HGVs and its businesses from the Packhorse site.
- It seems to me inherently more probable that Miss O'Callaghan simply cannot recall what was, in fact, an insignificant telephone conference than that both Russell and Lee Allen are lying about it. Moreover, if they were lying, I consider it likely that in his witness statement Russell Allen would have exaggerated the significance of what was said, and that in cross-examination Lee Allen would not have toned down the importance of what was said by acknowledging, as he did, that he did not tell Miss O'Callaghan what the claimant intended to do with the site. I am satisfied that Russell's account of the conversation is correct, and that Lee exaggerated the content of the conversation in his witness statement at paragraph 21.
- I accept Mr Hext's closing submission that the alleged telephone conversation between Lee Allen and Helen O'Callaghan is less important now it has been acknowledged that Lee Allen did not, in fact, tell Miss O'Callaghan what the claimant was intending to do with the site; but I reject Mr Hext's further submission that the court should prefer the account of Miss O'Callaghan. I find that the need for Miss O'Callaghan to ring Lee Allen back was because she needed to check up on the uses permitted by Use Classes B2 and B8. However, I do not accept that at this stage in the chronology the telephone conversation gave the defendant any further opportunity to advise the claimant on the planning position. The conversation between Miss O'Callaghan and Lee Allen disclosed nothing more than Miss O'Callaghan already knew from the local authority search of planning charges at page 1001. This was that there was a planning consent for an unidentified part of the site for change of use from B1 to B2 and B8 use, subject to conditions. That revealed nothing of concern, and was the reason that Miss O'Callaghan has no recollection of the conversation.
- I reject Lee Allen's account of the meeting on or around 20 October. I find that he did provide the information that was contained in the letter that Miss O'Callaghan wrote to Machins on that date. However, I reject the defendant's submission that Lee Allen deliberately minimised the extent of the works. I reject the defendant's submission that this was a deliberate tactic because Lee Allen did not want the prospect of a planning issue causing problems in relation to the claimant's application to the bank for a loan. I do so for three reasons: First, but least importantly, because of Lee's demeanour when he was being cross-examined on this topic. He looked Mr Hext clearly in the eye when answering questions. More importantly, and secondly, I find that Lee had already explained his plans to Jean Howe, who was the bank's valuer, and he was the source of her information about HGV parking. He knew also that she had seen the extent of the works with her own eyes. Thirdly, I find that Lee did not have any perception that there were any potential planning problems. That, of course, was a view shared by Jean Howe herself, as evidenced by paragraph 8.4.2 of her report at page 1130.
- I find that at the meeting on 27 October Miss O'Callaghan did not provide any adequate explanation of the planning consents or the planning constraints affecting Packhorse Place. She may well have explained that unit 7 had planning consent for class B2 and B8 use; but I find that there was no explanation of the significance of this, or of the planning position in relation to the remainder of the site. Miss O'Callaghan did not see the restriction to B1 use or the lack of any planning consent for HGV parking, otherwise than as ancillary to the permitted users of the various units, as an issue. On the information available to her, and in particular in the light of the Kirkby & Diamond report, I find that she should have done. I find that Lee Allen did not understand what was authorised by B1, B2 or B8 use and what was not. I find that Lee Allen did not appreciate the need for B2 use for vehicle repairs; nor did he appreciate the need for a specific planning consent for HGV contract parking.
- I reject Mr Hext's closing submission that Mr Lee Allen's protestations that he did not know what B1, B2 or B8 meant must be treated with care in the light of his evidence, and his email of 3 October 2005, responding to Miss O'Callaghan's email of 30 September.
- I also consider that the defendant's reliance on the reports on the leases is overstated. I find that the sections on user at pages 925, 930 and 934 do not necessarily suggest any constraint on the landlord's ability to consent to change of use. In relation to unit 2, what is said is that "the Premises must be used within B1 use. Use can be changed with the landlord's prior written consent unless objection is raised by another tenant": see page 925. In relation to unit 7 all that is said is that "the Premises must be used for B1 or B8 use. Use can be changed with the landlord's prior written consent": see page 930. In relation to unit 3 all that is said is that "the Premises must be used for B1 use. Use can be changed with the landlord's prior written consent": see page 934. There is no explanation of what is meant by the use classes there identified; nor is there any suggestion that there is necessarily any constraint on the landlord's ability to consent to change of use beyond the stated land use category.
- I reject Mr Hext's submission that, in the absence of any query from Lee Allen, Miss O'Callaghan was entitled to proceed on the basis that he was aware of what B1, B2 or B8 use meant. Even Miss O'Callaghan, in answer to a question from the bench in relation to the telephone conversation in late August or early September, acknowledged that she would have been likely to have had to look up precisely what was meant by B2 and B8 use.
- I accept Mr Jones's submission that the defendants were, or should have been aware, that the Packhorse Place site lacked planning permission for the claimant's intended activities prior to the completion on the property on 2 November 2005.
- I accept Mr Jones's suggestion that the defendant had in its possession all relevant information to have enabled the firm to advise on the planning position at the Packhorse Place site by about 10 or 11 October 2005 but that it failed to do so.
- I accept Mr Jones's further submission that the defendant failed to advise the claimant on the planning status of the site adequately or at all prior to completion on the property.
- I do, however, reject, as I have already indicated, Mr Jones's suggestion that the telephone call of late August/early September had given the defendant a further opportunity to advise the claimant on the planning position. I reject that submission in the light of the chronology. By that time, the defendant did not have sufficient information available to it to advise on planning issues with regard to the site.
- However, I do accept Mr Jones's further submissions at paragraphs 18 through to 24 of his written closing. I find that the defendant incorrectly recorded the position in its letter of 20 October to Machins where it said that no consents were necessary, at least to the extent of the HGV parking at the rear of the site. I find that it should have been abundantly obvious to the defendant that the works being undertaken were in respect of HGV parking, given the multiple references in the valuation report, and, in any event, the existence of a restriction on HGV parking at the rear of the site. Mr Carey accepted, when questioned at day 5, page 84, that, with hindsight, it was not correct to say that no consents were necessary.
- I have already indicated that I accept Mr Jones's submission that there was no proper and full discussion of the planning status of the site during the meeting that took place between Lee Allen and Miss O'Callaghan on 27 October. At day 6, page 10, Miss O'Callaghan said that all that she recalled was having told Lee Allen that unit 7 had a specific consent, but she could not recall whether she had said more than that.
- I accept Mr Jones's submission that, even on the defendant's own evidence, advice in respect of the remaining units, and the prohibition on HGV parking, was not given. That is borne out by the letters from Mr Carey written after the difficulties had emerged.
- Mr Jones is, in my submission, justified in his submission that the report on title in respect of Dominion House of 9 June 2005 (at page 823) is notable by way of comparison with the lack of level of detail contained within the report for Packhorse Place.
- Miss O'Callaghan should not have drafted leases for AW Transport and AW Commercial Repairs limited to B1 use without inquiry as to the use to which those parts of Packhorse Place were going to be put, and without full and adequate explanation of the restrictions inherent in B1 planning use.
- So, for all of those reasons, I find that the defendant solicitors were in breach of duty in failing to give proper advice as to the planning status of the Packhorse Place site.
Chapter 5: Causation.
- The defendant's case on this is set out at paragraph 43 of the defence. There it is denied that the claimant relied upon the defendant in the manner alleged, or that it would have acted differently if it had been differently advised by the defendant.
- The following points are specifically pleaded:
(1) The claimant had committed itself to the purchase of the property. Had it sought to pull out of the transaction it would have lost the £140,000 deposit. That the site did not have planning permission for the parking of HGVs or for the operation of a commercial vehicle repair workshop would not have justified the return of the deposit. Nor did Lee Allen believe that it would. In any event, the seller would not have returned the deposit without litigation.
(2) The claimant would have had no reason to consider that the planning restrictions of which it now complains would have had any material effect on the site's value. The valuation report prepared by Kirkby & Diamond had put no significant weight upon the projected revenue from parking HGVs and did not depend upon any specific use of any of the units as a commercial vehicle repair workshop.
(3) The claimant would have considered that there was a reasonable chance of obtaining planning permission for the relevant uses in any event. There was already parking on the site. Neither Lee nor Russell Allen would have regarded the use of the unused ground at the rear for parking of HGVs as representing a material incursion into the Green Belt, nor would they have considered that it would cause any significant deterioration in the appearance of the site overall. There was (and is) no additional reason to suppose that planning permission would not have been granted if required for the use of any of the units as a commercial vehicle repair workshop. The claimant would not have sought advice from the planning department.
(4) To the extent that the claimant wished to continue operations carried out at Chaul End Lane, it needed to make arrangements for an alternative site prior to the expiry of its licence to occupy Chaul End Lane on or about 21 November 2005. The claimant would not have been able to find an alternative to the Packhorse Place property for a significant period of time, and would thus have been left in the short to medium term with no base for those activities.
(5) The commercial vehicle repair workshop was not a profitable business in any event.
(6) The claimant's commitment to purchase the site is demonstrated by the fact that it did so (a) notwithstanding that it was not, in the event, able to persuade the seller to include in the purchase ownership of the access roads connecting the site to the A5, as it had hoped to do, and (b) despite the fact that it was told by Kirkby & Diamond, in an email forwarded to it on 27 September 2005, that it seemed to Miss Howe, the bank's valuer, that the claimant was paying "a very full price for the estate" and was "now not getting the potential benefits that were being offered for sale by the same vendor" the previous year. Miss Howe suggested that the claimant should ask the vendor's solicitor to include the whole of the title, including the bits out to the A5, as it impacted on the value of the site.
- In his written closing submissions, Mr Jones submitted that, had the claimant been made aware of the planning status of the site, it would not have proceeded with the purchase. He refers to various matters in support of that at paragraphs 25 through to 29.
- In his written closing, Mr Hext submits that the claimant would have gone ahead with the transaction in any event. He sets out his reasons for that at paragraphs 16 through to paragraph 28 of Mr Hext's written closing submissions. In his oral closing, Mr Hext said that the evidence against the claimant's case that it would have gone ahead with this transaction in any event "is absolutely compelling": see Day 7, page 118.
- Having carefully considered all that has been said, both by Mr Jones and by Mr Hext, in their respective written and oral closings, I accept the defendant's case as pleaded at paragraph 43 of the defence. I accept the defendant's submissions as to causation; and I reject those of the claimant.
- The full position with regard to the status of Packhorse Place for planning purposes did not emerge until the end of September 2005: see page 1183. It was only with the receipt, on 6 October, of the Kirby & Diamond report that the full significance of the need for planning consent for haulage, for vehicle repairs, and for HGV contract parking should have been apparent to the defendant. By this time, I find that the claimant was already too committed to the purchase of Packhorse Place, and also under too much pressure of time to deliver vacant possession at Chaul End, to have backed out of the purchase of Packhorse Place. I find, on the balance of probabilities, that it would not have done so.
- Without in any way derogating from all the points that Mr Hext has made by way of his written closing submissions, which I accept, I rely in particular upon the following: First, Russell Allen himself acknowledged in cross-examination that, despite what was said at paragraph 91 of his witness statement as to the purchase of an alternative site, in the time available the claimant could not have purchased an alternative site; it could only have rented one: see Day 3, pages 89 to 90.
- Secondly, the claimant would have lost £140,000 had it backed out of the purchase of Packhorse Place. I accept Mr Hext's submission that that sum would not have been recoverable by the claimant. I reject the claimant's counter-submission that this sum would or might have been recoverable. I reject any submission that there was any real or substantial chance of its recovery. In his witness statement, Russell Allen said (at paragraph 96) that he accepted that, at the time he discussed the deposit with the seller of Packhorse Place, he did not have in mind the possibility that planning issues might emerge, and there was no discussion between himself and the sellers as to what was to happen with the deposit in the event of planning difficulties. Mr Russell Allen went on to say that he is still of the view that the sellers would have in fact returned the deposit to him had he pulled out due to planning issues prior to completion. I reject that evidence. The vendors were selling as trustees. There was no legal or equitable basis upon which they could properly, and consistently with their fiduciary duties, have surrendered any part of the deposit, or returned any part of it to the claimant.
- Russell Allen went on to say that, even if the seller had refused to return the deposit, he would have sacrificed it rather than take the site. The reason that he gave was that the possible loss of roll-over relief, and the difficulties that would ensue by not having planning permission, made the sum of £140,000 small in comparison. He also added that he could not have proceeded with the transaction without the bank's support, and this simply would not have been forthcoming. I reject that evidence on the part of Russell Allen.
- My third reason is that the claimant was under immense financial pressure to vacate Chaul End by 21 November and, at the very latest, by 5 December 2005. Although the licence agreement for the removal of equipment was not signed until 28 October, it had been in discussion since, at the latest, 22 August 2005: see page 1023. When the claimant succeeded in securing an extension of time to remove its plant and equipment from the site, it was required to do so without penalty by 21 November; and the claimant would lose as much as half a million pounds if it failed to have done so by 5 December.
- Fourthly, I am satisfied that the claimant would have perceived there to be no real risk of effective enforcement action, even if it had been alerted to the true planning position. Mr Russell Allen said that he had known the site as a lad and had remembered it as a haulage yard: see Day 3, pages 157 to 159. I am satisfied that, against that background, Russell Allen would have taken the view that there was no real prospect of effective enforcement action. At paragraph 68 of his witness statement, Russell Allen said that Lee had told him, in about May 2006, that an enforcement officer had visited the site and told Lee that there was no planning permission for the claimant's activities. Russell Allen can remember commenting to Lee that he had heard that "old chestnut" before, as he had known of another occasion when a planning officer had wrongly claimed that there was no planning permission. At that stage, Russell Allen had thought that there was nothing to worry about. I am satisfied that that is the view he would have taken even had he received appropriate planning advice from the defendant in October 2005 or earlier.
- Fifthly, even if the claimant had perceived there to be a risk of enforcement action, it would have taken the view that that was a risk that it could have afforded to take. I find that Russell Allen knew that the haulage and vehicle repairs businesses were not profitable in the long-term. The claimant would have taken the view that any effective enforcement action, even if ultimately it were to prove successful, could have been spun out for so long that the real objective of moving those businesses to Packhorse Place, which was the obtaining of roll-over relief, would actually have been achieved. In the event, the claimant would have been proved correct. Despite the enforcement action that was taken, the court was told that the claimant had secured its roll-over relief. Once that relief had been obtained, the claimant would have perceived that it could then re-let any affected units. That is supported by the expert valuation opinion of Miss Howe, as set out in her report at 1134, where she described the market as being "relatively buoyant" as an industrial investment. She also described the claimant as being "well positioned within the haulage fraternity to put lettings in place" and expressed satisfaction that "the hands-on management" would ensure "a good level of occupancy on the estate into the future". She expressed her understanding from Lee Allen that there were three tenants waiting for space as and when it should become available. I am satisfied that, even without the use of the land at the rear for HGV parking, the claimant would, in October 2005, have perceived there to be a good market for the letting of units at Packhorse Place.
- For those reasons, and also for the additional reasons set out at paragraph 43 of the defence, and in paragraphs 15 to 28 of the defendant's written closing, I find that the claimant has failed to establish its case on causation.
- In the course of their evidence, both Russell and Lee Allen asserted that they had not read the report on title: see Day 3, pages 71 to 74 and Day 4, pages 9 to 11 respectively. Mr Hext, rightly, did not seek to argue that the omission to read the report on title was fatal to the claimant's case on causation. That is because, once the Kirby & Diamond report had been properly assimilated and taken on board, advice on the planning status of the site would have become a matter of such significance that it should have been communicated directly to the claimant in a manner that Russell and Lee Allen could not have ignored. In any event, I am not sure that I can accept Russell and Lee's evidence that they never read the report on title. If true, however, it only serves to reinforce my view of them as risk takers, who were eager to proceed with the purchase of Packhorse Place, notwithstanding any legal niceties. After all, they went ahead, despite having been advised that, in the opinion of Miss Howe, they were paying a "very full price" for the estate, and notwithstanding the fact that they had been unable to secure all of the land that had apparently been on offer to prospective purchasers when the site had been marketed the previous year.
- In the course of a post-hearing exchange of emails, Mr Hext submitted that, if the question of whether the claimant would have pulled out of the Packhorse Place transaction should depend upon the availability of an alternative site, then properly that was a loss of a chance rather than a balance of probabilities question. By way of response, Mr Jones submitted that it was fundamentally wrong to speak of the prospect of finding alternative accommodation as the loss of a chance. Whether the claimant would have proceeded with the purchase of Packhorse Place in any event was said by Mr Jones to be an issue to be decided on the balance of probabilities. What the claimant would have done had it not bought Packhorse Place was said to be irrelevant in the assessment of damages.
- I am content, for present purposes, to accept Mr Jones's approach; but, adopting that approach, I find that the claimant's case on causation has not been made out. For the reasons given by Mr Hext in his written closing submissions, I can see no alternative to the claimant having proceeded with the purchase of the Packhorse Place site, given the limited time available to the claimant to find any alternative property, even by way of rental. The difficulties with finding alternative rental properties have been sufficiently identified in Mr Hext's written closing submissions, which I accept.
- At one time I should record that I had thought that the need to secure vacant possession of Chaul End by moving the existing tenants over might feature as a relevant consideration. However, that is not something that is pleaded in paragraph 43 of the defence; nor was it raised, or explored, in evidence. Although it was briefly touched upon in response to a question from the bench in Mr Jones's closing, at Day 7, pages 92 to 93, in my judgment the defendant is not entitled to pray that aspect of the matter in aid on the issue of causation. I have disregarded any difficulty there might have been about moving existing tenants over in my evaluation of the causation issue.
Chapter 6: Loss and damage.
- In the light of my finding on causation, it is strictly unnecessary for me to decide the issue of damages; but I should set out my findings briefly in case my decision is challenged on appeal. Having observed all three valuers in the witness box, I found Miss Lock to be the most impressive of the three. I found her to be considered and measured in her evidence. She had also made appropriate concessions, as in her second supplemental statement of 17 July 2013. Without in any way attributing any impropriety to Mr Honeywill, I consider his evidence to have been unduly influenced by information provided to him by the claimant.
- I consider Mr Morgan, whose evidence related only to the parking of HGVs, to have been unduly arrogant in his evidence, and overly dismissive of points properly put to him by counsel.
- There is surprisingly little difference between the parties' expert valuers as to the true open market value of Packhorse Place with the benefit of the actual planning consents that existed. Miss Lock's latest adjusted valuation ascribes an open market value of £2.09 million to the property. Mr Honeywill's primary valuation figure is £2.032 million, which he rounded down to 2 million, although he also puts forward a check valuation of 2.02 million by way of a cross-check. In cross-examination, Mr Honeywill stated that he would not argue with Miss Lock's attribution of a nominal value of £10,000 to the area of land at the rear of the property: see Day 6, pages 69 to 70. On that basis, the difference between Miss Lock and Mr Honeywill narrows to only some £50,000, 2.09 million against 2.042 million.
- Having heard the cross-examination of the experts, in my judgment Mr Honeywill's primary valuation is open to criticism because it involves deducting a second set of purchaser's costs, resulting in a deduction of some £116,000, whilst his cross-check is open to criticism because, having de-capitalised the cost of works over only five years, he then capitalised the lower rent thereby produced in perpetuity. Mr Honeywill's initial acceptance that this was wrong was later retracted: see Day 6, pages 105 to 107, and contrast the same day, pages 115 to 116.
- Mr Hext submits that Mr Honeywill's earlier response is revealing, and I accept that submission. In reality, the principal difference between the two valuers comes down to their different assessments of the costs of converting the affected units for the sole permitted B1 use and the time required for doing this. As to that, Miss Lock adopts markedly lower figures than Mr Honeywill. However, she was prepared to acknowledge that:
"It is difficult to be absolutely precise about these costs": see paragraph 12.33.
Doing the best I can on the basis of the expert evidence, I would assess the open market value of Packhorse Place with the benefit of the actual planning consents on 2 November 2005 at £2.07 million.
- Miss Lock and Mr Honeywill value Packhorse Place with the benefit of the planning consents which were assumed to exist at £2.37 and £3.285 million respectively. The latter valuation exceeds the purchase price of £2.8 million, which Miss Howe contemporaneously described, on 27 September 2005 (at page 1189) as "a very full price".
- However, Miss Lock's valuation proceeds on the following basis, as described at paragraph 3.1 of the joint statement at page 280:
"My instruction in respect of the valuation assuming that planning permission is in place is to establish the level at which a notional purchaser in the market would have paid for the property. Thus, ignoring the tenants which the claimant was bringing to the property and the income from subsidiary companies. I have also been instructed to ignore the fact that the claimant had, in the period immediately prior to 2 November 2005, carried out works to create the hard standing. This valuation should reflect that the works to create the HGV planning need to be undertaken and the vacant units are not income producing. This was the status when the claimant acquired the property and therefore should reflect the status for valuation purposes. It is considered that assuming the HGV parking has been created and the property is let and income producing is a worth calculation not based on the definition of Market Value. I consider that my two valuations are on a like for like basis which, given that both have the same valuation date, should be the case."
- There is also a dispute between the valuers as to the number of available HGV parking spaces. Mr Honeywill ascribes 35 to that whereas Mr Morgan adopts a lower figure of 24. That difference was probed extensively in cross-examination.
- In closing, Mr Jones submitted that this is not an exercise in identifying what a commercial investor would have paid for the property in November 2005 were the claimant not in the market had the facts the claimant believed been true, and then comparing that with the actual open market value. The defendant did not warrant the planning status of the site or its hypothetical open market value in the event it had the planning permissions the claimant believed it had. According to Mr Jones, the correct question is what the claimant did as a result of the defendant's negligent advice (or in reliance upon the lack of proper advice), and to compare that outcome with the position the claimant would have been in had the claimant been properly advised. It is said by the claimant that, on the evidence, acting in reliance upon the defendant's failure to draw to the claimant's attention the planning issues with the site, the claimant bought a site that was not suitable for the purposes which it intended.
- Mr Jones also submits that the approach of Miss Lock is wrong. He says that it is ridiculous to assume that the claimant was not in the market and had not done the works on site prior to completion. The claimant was in the market and had done those works. Upon completion of the purchase, the claimant had, on the assumption that the necessary planning consents existed, a site worth more than 2.8 million, plus the cost of those works, fully tenanted (as the bank had insisted); but the claimant could, in fact, sell the site for only 2.07 million (as I have found).
- In his closing, Mr Hext submitted that the principal loss was the diminution in value of the property. As a matter of law, the right approach in the context of a case like the present was to consider the difference between (a) the open market value of the asset acquired as it actually was and (b) whichever was the lower of the price paid and the open market value of the asset in the state in which, as a result of the negligent advice, it was thought to be.
- Reliance is placed on the County Personnel case at page 925. Mr Hext suggests that one might reach the same result by an application of the well-known principles set out in South Australia Asset Management Corporation v York Montague Limited  AC 192 (SAMCO). Mr Hext submits that the purpose of the valuation exercise is to determine the extent to which a diminution in value is referable to the missing planning permission. To carry out that exercise, one must be consistent in the approach that one takes to the "with planning permission" and "without planning permission" valuations. The approach that the experts have taken for both valuations is an investment valuation. Mr Hext submits that (1) Miss Lock was right to factor in a period of voids. On an objective assessment of the open market value of the property that the claimant was purchasing, one has to approach the property as it was when the claimant came to it, namely with voids in units 1, 4, 5 and 9. (2) Mr Honeywill's (very late) assertion that one should assume immediate occupancy, on the basis that the purchaser is likely to be an owner occupier, cannot be accepted because, even on the basis of what the Allens did, they still needed to find tenants for unit 5 and most of unit 1; and also because the method of valuation adopted by both experts was that of an investment analysis. That assumes that the units are to be leased out. Just because someone seeking to purchase the property was himself an owner occupier cannot change the objective value. (3) As a matter of common sense, one cannot approach the value of the asset in the state it was thought to be by taking into account improvements made to it by the claimant in the anticipation of purchase. Thus, one must assume that works would need to be carried out to create a hard standing. (4) In any event, on the evidence, Mr Hext submits that certain works were still required.
- In my judgment, in a case such as the present, the starting point in assessing the measure of damages is the difference between the price paid for the relevant property and its true open market value at the time of purchase. But that is just the starting point. Mr Jones cited the cases of Ford v White  1 WLR 885, a decision of Mr Justice Pennycuick, and Wapshott v Davis Donovan & Co  PNLR 361, a decision of the Court of Appeal. Those cases, however, pre-dated the seminal decision of the House of Lords in the leading case of SAMCO, previously cited. I am satisfied that the law has moved on since the two authorities cited by Mr Jones were decided.
- As Mr Jones submitted, in SAMCO the House of Lords held that, in the case of breach of duty for failure to supply information, the defendant would be responsible for all the foreseeable consequences of the information being wrong, and the measure of damages is the loss attributable to the inaccuracy of the information which the claimant has suffered by reason of having entered into the transaction on the assumption that the information was correct. The House of Lords confirmed that the court has to compare the loss that the claimant has suffered with what his position would have been if he had not entered into the transaction, and it has to ask what element of this loss is attributable to the inaccuracy of the information provided by the defendant: see especially Lord Hoffmann at page 214, letters C to G and page 216, letters D to F.
- Mr Jones also relied on the cases of IRC v Clay  3 KB 466, a decision of the Court of Appeal, and Glass v Inland Revenue  SC 449 (the Court of Session sitting as the Valuation Appeal Court), for the proposition that, where there is evidence of a purchaser with a special interest in a property, the court should reflect that fact in its assessment of open market value, and not simply rely upon a hypothetical purchaser with no such interest. However, in my judgment the application of the "special purchaser" principle presupposes knowledge of such interest in the market generally: see Lord Justice Swinfen Eady at page 475 and Lord Justice Pickford at page 479. I am not satisfied on the evidence that this is a "special purchaser" case.
- I find illuminating the discussion by Lord Justice Bingham, delivering the leading judgment of the Court of Appeal in the County Personnel case (previously cited), at page 925, letter A to 926, letter E. The passage begins with Lord Justice Bingham stating that it had been said that the correct measure of damage (whether in contract or in tort) for negligent advice was the difference between (a) the open market value of the asset acquired as it actually was and (b) whichever was lower of the price paid and the open market value of the asset in the state in which, as a result of the negligent advice, it was thought to be. Lord Justice Bingham, for convenience, called that "the diminution in value rule". Lord Justice Bingham then went on to set out the principles to be applied in assessing damages in eight numbered paragraphs. He began by restating the overriding rule, as stated by Lord Blackburn, in Livingstone v Rawyards Coal Company (1880) 5 App Cas 25, at page 39. The measure of damages was
"that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation."
- Lord Justice Bingham then went on to cite from the judgment of Lord Justice Megaw in Dodd Properties (Kent) Limited v Canterbury City Council  1 WLR 433, at 451:
"In any case of doubt, it is desirable that the judge, having decided provisionally as to the amount of damages, should, before finally deciding, consider whether the amount conforms with the requirement of Lord Blackburn's fundamental principle. If the appears not to conform, the judge should examine the question again to see whether the particular case falls within one of the exceptions of which Lord Blackburn gave examples, or whether he is obliged by some binding authority to arrive at a result which is consistent with the fundamental principle."
- Lord Justice Bingham gave as his second proposition the fact that, on the authorities as they stood, the diminution in value rule appeared almost always, if not always, to be appropriate where property was acquired following negligent advice by surveyors.
- In his third proposition, Lord Justice Bingham indicated that that was not, however, an invariable approach, at least in claims against solicitors, and should not be mechanistically applied in circumstances where it might appear inappropriate.
- At proposition five, Lord Justice Bingham said:
"On the facts of the present case, the diminution in value rule would involve a somewhat speculative and unreal valuation exercise intended to reflect the substantial negative value of this underlease. It would also seem likely to lead to a total claim well above the figure the plaintiffs claimed."
- On the particular facts of that case, the Court of Appeal adopted the cost of extrication as the appropriate measure of damages rather than applying the diminution in value rule.
- As I say, I find that discussion by Lord Justice Bingham illuminating. One must always have regard to the overriding rule, as stated by Lord Blackburn, of identifying that sum of money which would put the party who has been injured or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now seeking his compensation or reparation.
- In my judgment, if the diminution in value rule results in either under, or over, compensation on the facts of a particular case, it may need to be departed from, or applied with some modification. On the particular facts of the present case, I consider it to be inappropriate to proceed on the basis postulated by Miss Lock at paragraph 3.1 of the joint statement, for the reasons advanced by Mr Jones. The starting point in assessing damages must be the difference between the purchase price and the true open market value of Packhorse Place in its actual condition. On the evidence, that is £730,000, the difference between 2.8 million and 2.07 million. However, the SAMCO case establishes that the defendant is only liable for that part of the loss which is attributable to the lack of the appropriate planning consents. So, if the claimant overpaid for the property for reasons other than lack of the appropriate planning consents, the defendants are not liable to the extent of that element of the overpayment.
- In determining the extent of the overpayment, however, it seems to me that the court is entitled to look to particular features which are peculiar to the transaction in question. If an income stream is immediately available, rather than being deferred, then in my judgment the court, when assessing damages, should not ignore that fact. Here, by the date of completion (and as I find), (1) the hard standing had already been completed, with only minimal additional works required, and (2) tenants had already been found, and were ready to move in, so that Packhorse Place was capable of generating an income stream from day one. So far as the parking of HGVs is concerned, that is demonstrated by the synthesis of rental invoices prepared by the defendant's solicitors, Bond Dickinson, which was added to the end of the core bundle.
- When assessing the hypothetical value to be attributed to the property, on the assumption that the planning issues of which the claimant complains in this litigation did not affect the property, the court should not, in my judgment, ignore the actual facts. That would seem to me to be consistent with a principled application of the decision in SAMCO, and also with the principle that a valuer should not be left to listen to conjecture on a matter which has become an established fact (or, as Lord Macnaghten put it in the case of Bwllfa & Merthyr Dare Steam Collieries (1891) v Pontypridd Waterworks Company  Appeal Cases 426 at 431, "With the light before him, why should he shut his eyes and grope in the dark?") During the course of his closing, I addressed this point with Mr Hext: see Day 7, pages 145 to 143. Mr Hext submitted that, if the court were looking to establish the extent to which the claimant had overpaid the vendor, it had to look at the property as it was in the vendor's hands, and not in the hands of the purchaser; so that the court was required to ignore any activities on the part of the purchaser which had themselves added to the value of the property. I simply fail to see why that should be the case. If, by the date of completion, a purchaser has improved a property, and found tenants for parts that are vacant, I fail to see why those facts should be ignored when the court is engaged in the task of ascertaining the extent to which the purchaser has overpaid for the property, independently of the breaches of duty of which complaint is made in the litigation in which the question arises. The existence of the purchaser's works to the property, and the availability of tenants ready to enter into immediate occupation of vacant parts, would seem to me to be aspects of "the asset acquired as it actually was", to quote Lord Justice Bingham. One may reach the same result by a principled application of the SAMCO principles. For those reasons, I reject Miss Lock's valuation approach as a matter of law. On this issue, and as a matter of law rather than valuation practice or expertise, I prefer the valuation approach of Mr Honeywill.
- I turn to the issue of HGV parking. This was addressed in the claimant's closing at paragraphs 3.6 to 3.8 and in the defendant's closing at paragraphs 33 to 45. I will not burden this already over-lengthy judgment by reciting those paragraphs. I have borne their contents firmly in mind. Having heard the expert evidence, I am satisfied that the appropriate number of HGV parking spaces to adopt for valuation purposes is 26. In the north-west of area A, I find that there was potential to park four HGVs rather than Mr Honeywill's five, and rather than Mr Morgan's three. In area B, I find that there was potential to park six HGVs rather than Mr Honeywill's eight and Mr Morgan's five. In area C, I accept Mr Morgan's figure of no HGVs rather than the six vehicles postulated by Mr Honeywill.
- In relation to area C, I arrive at that result for two reasons. First, because I accept what Mr Hext has to say in his written closing at paragraph 36: The claimant is seeking to claim the value of the parking in area C twice. The leases, and thus the rents that are subsequently capitalised, already assume an element of parking on the estate. To say that those areas can be used for contract parking represents double counting. Secondly, I accept the submission at paragraph 38 of Mr Hext's written closing: It was no part of the claimant's intention at the time of acquiring Packhorse Place to rent out HGV parking spaces in area C. The relevant calculation must relate to the open market value of the asset in the state it was thought to be. Lee Allen accepted (at Day 4, pages 84 to 86) that he had not looked at the option of parking HGVs in area C in October 2005.
- The result is that I would have adopted a figure of 26 for the number of HGV parking spaces. I would have reduced Mr Honeywill's figure by one in the north western part of area A, by two in area B and by all six of Mr Honeywill's HGV parking spaces in area C.
- I would have accepted Mr Morgan's opinion as to HGV rentals at paragraph 2.4.4 of his report. Adjusted for 26 rather than 24 spaces, I would have calculated the weekly rental at £1,350 (representing Mr Morgan's £1,245 plus one bus at £45 and one articulated lorry at £60), equating to an average of £51.92 per week. On the basis of full occupancy, I calculate that that would produce a yearly rental of £70,200. I would have applied an occupancy level of 70 per cent (slightly above Mr Morgan's 66.6 per cent) in order to arrive at a gross yearly rental of £49,140. I would then have deducted Mr Morgan's operational costs of £13,117 per annum to arrive at a (rounded) yearly net rental of £36,000. Adopting a yield of 10 per cent, which I consider to be the appropriate yield, (equal to 10 years' purchase), I would have arrived at a capital value attributable to HGV parking of £360,000.
- Therefore, had it been necessary for me to do so, I would have assessed damages as follows:
Agreed passing rents on completion (excluding HGV parking spaces): see joint statement paragraph 7.3: £225,516.
At 8.7% (a multiplier of 11.4285), which I consider to be the appropriate yield, I would have arrived at a figure of: £2,577,310.
Plus HGV parking: £360,000,
I would have arrived at a total figure of: £2,937,310.
I would then have deducted purchaser's costs at 5.75 per cent: see the joint statement 3.8, a deduction of: (£168,895)
That would have resulted in a net value figure of: £2,768,415.
I note that that figure accords reasonably well with the price actually paid for the property, apparently after full marketing and in the face of competition from other purchasers.
- In order to arrive at the loss, I would then have deducted the previously arrived at open market value of £2.07 million. That would have produced a loss, according to my calculations, of £698,415. In addition, I would have found that the claimant was entitled to recover those parts of the stamp duty land tax and of the solicitor's fees which were attributable to the price overpaid for Packhorse Place.
- From this sum, I would then have deducted the £140,000 non-refundable deposit. I accept Mr Hext's closing submission at paragraph 47 that £147,000 must be deducted from the calculation of loss on the basis that that sum was paid over prior to, and not in reliance upon, the defendant's advice, and would not have been returned." As I have indicated, I have already rejected the submission advanced by the claimant that the deposit would have been recoverable, or that there was any real or substantial chance of recovering it. As I have said, the vendors were selling as trustees, and there was no legal or equitable basis for them to surrender any part of the deposit.
- In addition, I would have allowed the claimant to recover the costs of seeking to secure planning permission as reasonable costs of mitigation. I reject paragraph 51 of Mr Hext's written closing submission. There he submitted that the costs of the enforcement action and the appeal were not costs of mitigation because the claimant had suffered its loss when it purchased the property. Obtaining planning permission would not have changed that. It seems to me that that ignores the fact that the expenditure on the costs of the appeal, and of resisting the enforcement action, were reasonable costs of mitigation. Had the claimant been successful, then it would have mitigated its loss by ensuring that it could continue to use the Packhorse Place site for HGV parking.
- To the extent that the sums in question were not capable of agreement between the parties, I would have directed an inquiry. That might have been necessary, in the absence of agreement, because the invoices upon which reliance is placed by the claimant included also fees referable to taking advice on the claim against the defendant, which cannot form part of the reasonable costs of mitigation. Hopefully the parties would have been able to reach agreement without the need for such an inquiry.
Chapter 7: Contributory negligence.
- Again, this is academic in view of my finding on causation. It was addressed in the defendant's closing at paragraphs 56 through to 60. Mr Hext submits that it is inconceivable that the claimant had no knowledge as to the requirement for planning consent for HGV parking, haulage and commercial repairs. At no stage did the claimant ask the defendant to consider whether the claimant needed planning consent for what it was intending to do. The lack of care in failing to make such inquiry is said to be even more stark against the background of the claimant's asserted failure to read the report on title, which referred to the fact that the planning position had not then been clarified, and the reports on the leases, which all contained references to B1 use, together with B8 use for unit 7. That is all said to be compounded by the manner in which the claimant is said to have kept the defendant in the dark about what it was intending to do with Packhorse Place. The defendant, therefore, submits that there must be a significant reduction for contributory negligence.
- I reject that submission. The claimant's acts or omissions may have contributed to the purchase of Packhorse Place in ignorance of the true planning status of that property and the loss and damage resulting from that purchase. However, I do not consider that the claimant's acts or omissions amounted to fault for the purposes of the Law Reform (Contributory Negligence) Act 1945. So far as the asserted failure to read the report on title is concerned, that would have provided no illumination on the matter because at the time the report on title was prepared, the planning position had not then been ascertained. The truth is that the defendant never produced a proper and comprehensive report on the planning status of the property. In that respect, as Mr Jones has pointed out, the position can be contrasted with that in relation to Dominion House. In my judgment, the claimant was not in any way contributorily negligent in failing to make inquiries as to the planning position from the defendant. It was the defendant's duty to advice the claimant as to the true planning status of the property, and it cannot seek to shuffle off its failure to do so by way of an allegation of contributory negligence.
Chapter 8: Interest.
- Mr Jones did not dissent from the rate of 2 per cent above National Westminster Bank base rate, which was noted at Mr Hext's closing submissions (at paragraph 55) in reliance on a letter from the claimant's former solicitors (Lester Aldridge) of 21 May 2013. I would have allowed the rate of 2 per cent above NatWest base rate from time to time. However, I would have disallowed two years' interest (from 29 September 2009 to 29 September 2011) for the delay between the dismissal of the planning appeal in July 2008 and the issue of the claim form in September 2011. I would also have ordered that revenue actually received from HGV contract parking should be set-off against the award of interest.
Chapter 9: Disposal.
- For the reasons set out above, the claimant succeeds on breach of duty but fails on causation. Had I upheld the claimant's case on causation, I would have awarded damages of £698,415, less the deposit of £140,000, making £558,415, to reflect the diminution in value of the property attributable to the loss of the HGV parking and the other planning difficulties. I would have ordered an inquiry before a Chancery Master as to the other heads of loss and interest, on the basis I have already outlined, if these proved incapable of agreement.
- That is my judgment.
Submissions by MR HEXT
MR HEXT: My Lord, I would ask for my costs of the proceedings on the basis I am the successful party.
JUDGE HODGE: Are there any relevant admissible offers of settlement?
MR HEXT: My Lord, there are. They are in the bundle I handed up that my learned friend has. There are in fact two offers that I would submit really make my position difficult to resist, I would submit. My Lord should, I hope, have an index at the front.
JUDGE HODGE: Yes.
MR HEXT: The first of the offers is at page 11.
JUDGE HODGE: It says "without prejudice" in the index. Does that mean "without prejudice --
MR HEXT: My Lord --
JUDGE HODGE: -- save as to costs"?
MR HEXT: That's interesting you should ask that question. The way this bundle has evolved is that those instructing me have put together a bundle of correspondence which in the event included at least two, possibly three, documents that were thought by us to be WP but they have been included at the insistence of the claimants.
JUDGE HODGE: Yes.
MR HEXT: Given that we put them in the bundle in the first place, so I had not intended to take a point on that for that reason. But I don't think it really makes any difference for present purposes because the two offers that I want to draw to your attention are both -- well, one of them is a WP save as to costs order and the other is a Part 36 offer.
NEW SPEAKER: Yes.
MR HEXT: The first then is on page 11, 27 March.
JUDGE HODGE: Yes.
MR HEXT: I don't need, my Lord, to read the whole of that letter. The substance is -- well, one can see it's a WP save as to costs offer. The substance is in the fourth paragraph. That was an offer of 300,000 plus costs.
JUDGE HODGE: Yes.
MR HEXT: Then, my Lord, moving on in the bundle, if you will forgive me one moment, to page 16.
JUDGE HODGE: Yes.
MR HEXT: We made a formal Part 36 offer on 13 May in the sum of 500,000 plus costs. It's right to say, my Lord, that there are one or two points in that letter that generated some correspondence following on, but in fact I would submit that it was made absolutely clear – and I will take my Lord to it, if necessary, if my learned friend wants me to.
JUDGE HODGE: Yes.
MR HEXT: I would say that it was made absolutely clear that this is a Part 36 offer for £500,000.
JUDGE HODGE: Yes.
MR HEXT: As I say, that was made on 13 May. My Lord, I would submit, as a matter of principle, I am the successful party. My learned friend may well have been entitled to a judgment for nominal damages, but it's well established that nominal damages is not a win for the purposes of costs.
JUDGE HODGE: Yes.
MR HEXT: Firstly, I would say, as a matter of principle, I am successful and therefore I should get my costs.
Secondly, if and insofar as there is any doubt about that, we have made these two offers which were reasonable and would have resulted in the claimant making a recovery here in circumstances where in fact, as a result of my Lord's judgment, no recovery has been made.
JUDGE HODGE: Are you asking for costs on the standard basis?
MR HEXT: My Lord, I am not going beyond the standard basis.
JUDGE HODGE: Yes, thank you.
MR HEXT: If you bear with me for a moment. I would ask for interest on costs from the date of payment. My Lord may well no doubt be aware that there is jurisdiction under CPR 44.3 rule 6(a) for interest on costs from the date of payment up to the date of judgment, and that covers what would otherwise be a lacuna in the judgment.
JUDGE HODGE: And at what rate?
MR HEXT: My Lord, I would submit that I should have it at 1 per cent above base.
JUDGE HODGE: Yes.
MR HEXT: I don't say 2 per cent. I am an insurance company.
JUDGE HODGE: Yes. Yes, Mr Jones.
MR JONES: My Lord, you appreciate I don't have solicitors. May I have five minutes to take instructions, just to make sure that what I am going to say is acceptable?
JUDGE HODGE: Yes, of course.
MR JONES: I am much obliged.
JUDGE HODGE: I will return at 4.25.
MR HEXT: My Lord, before my learned friend starts, can I just say that I had rather assumed we are dealing with the question of principle here. I will of course be asking for payment on account, but it may be sensible to deal with the point of principle first.
JUDGE HODGE: Yes. Yes, Mr Jones.
Submissions by MR JONES
MR JONES: My Lord, I can't argue against my learned friend's application for costs or against the application for interest, but I do make one point about the basis on which it should be assessed, and that is that, in my submission, the defendant's attempt to argue away the scope of duty and to persuade the court that there was no breach of duty was, from the outset, a futile exercise and it added enormously to the length of the trial because so much time was spent in trying to whittle away at that point. Therefore, my submission is that the defendants ought to be deprived of some part of their costs, some proportion of their costs, to reflect the fact that the trial was extended unnecessarily and unreasonably by that attempt. I would submit that, although I appreciate that we lost half a day at the beginning through us not being ready, which is just one of those things, we have to accept responsibility for that, although it arose in unfortunate circumstances from my client's point of view, my submission is that two or two and a half days could have been saved if that point, if that attempt to pretend that there was no breach of duty, had not been made and it should not have been made.
JUDGE HODGE: Yes. Mr Hext.
Submissions by MR HEXT
MR HEXT: My Lord, I think my learned friend is effectively asking for something similar to an issues based order.
JUDGE HODGE: Yes.
MR HEXT: My Lord will no doubt be very familiar that there are authorities going both ways on it and you have a broad discretion in relation to it. Perhaps if I could say just one or two things as a matter of principle.
First of all, I would resist the proposition that we were unreasonable to contest. Of course parties can contest issues and fail on them without that necessarily being unreasonable.
Secondly, I would submit that in complex litigation, and I would submit that this is complex litigation, it is almost inconceivable that a party would go to trial on a matter and not fail on something.
Thirdly, there is, we would submit, a cross over between the issues of breach and causation because plainly the question of intention and what the claimant was going to do and the reasons it was going to do it were relevant to both of those issues.
Fourthly, I would resist strenuously my learned friend's suggestion that it's two to two and a half days. That's almost half the trial. That cannot possibly be right. Much of this trial was to do with issues that we were successful on, and two to two and a half days is an enormous deduction from my costs.
Then, finally, my Lord, one has to take into account the question of the Part 36 offer. My Lord, can I ask you to turn to rule 36.14. It's on page 1144 in the White Book.
JUDGE HODGE: Yes.
MR HEXT: The scheme of the rule no doubt will be very familiar, but we are dealing here with a claimant who has failed to obtain a judgment more advantageous than the defendant's Part 36 offer. That's 36.14.1(a). Sub rule 2 deals with what the order ought to be where that applies. It says:
"The court will, unless it considers it unjust to do so [pausing there, unjustness is dealt with in sub rule 4, and I would submit none of those are applicable to this case] that the defendant is entitled to his costs from the date on which the relevant period expired and interest on those costs."
Now, my Lord, I would submit that "his costs" is the entirety of my costs rather than a part of my costs.
Now, my Lord, I raise this point because in fact it's an issue which has been looked at in the past but has not actually yet been resolved. There is a reference to it in the note at 26.14.2. You can see in the second paragraph, there, there is a case of Castor Navigation which is decided on the old wording of the rule that "his costs" meant such costs as would, on the application of the principles set out in 44.3, be awarded, disregarding the effect of Part 36. So that case is against me. However, the wording has changed since that case was in place. There has been a very recent Court of Appeal judgment in a case called F&C Alternative Investments v Barthelemy where the Court of Appeal effectively regarded the point as open, which is why I raise it.
My Lord, my primary submissions would be that, a a matter of interpretation of 36.14, "his costs" can only mean my costs and the entirety of my costs from the date of the offer or the date of expiry of the offer.
If you are against me on that point, my Lord, then I would submit, as a matter of discretion, you ought to take into account the Part 36 offer in holding in my favour on this point. The reason that I would invite you to do that is that effectively the Part 36 offer -- my Lord, I am conscious that I don't want to speak over you.
JUDGE HODGE: No, that's fine.
MR HEXT: I would ask you, even if you are against me on the point of jurisdiction as to whether or not "his costs" means all of the costs, as a matter of discretion, I would invite you to award me all of my costs from the date of expiry of the offer. My learned friend has not asked for a division of costs prior to that, on the basis that the offer is a recognition of the difficulties we had on breach. Essentially, what we were saying is we will pay you a sum of money, and actually quite a large sum of money, to get rid of this action, and the claimant chose not to accept that. In those circumstances, we obviously pressed on with the issue. But in circumstances where the claimant was effectively turning down what was a very reasonable offer, I would submit that the cause, as it were, of the costs that have been expended of the entirety of the trial are the failure of the claimant to accept that offer.
JUDGE HODGE: Yes.
MR HEXT: I should also say, my Lord, I did not mention it but I should also say because I know about it, that on that Castor point I appeared in front of Mr Justice David Steel. I was on the other side and he held in my favour on that point, so that's a decision that goes against me. So I should draw that to your attention, but was again a first instance decision.
My Lord, those are my submissions on that point.
JUDGE HODGE: I think it would be sensible also, so that I can deliver a single judgment, for you to address me on the amount of costs.
MR HEXT: Yes.
JUDGE HODGE: By way of interim payment as well.
MR HEXT: My Lord, yes.
JUDGE HODGE: I can discount it appropriately if I accept Mr Jones's submission.
MR HEXT: My Lord, yes. The appropriate schedule is in that bundle at page 8. You will see that there is a grand total of £197,897.
JUDGE HODGE: Yes.
MR HEXT: I would ask for a sensible proportion of that. I would put forward perhaps 60 per cent of that figure. Just by way of comparison, immediately following I hope you should have -- that's in addition to the bundle. Does my Lord have the claimant's statement of costs?
JUDGE HODGE: Only if it's part of this additional material. Yes, I think it is.
MR HEXT: You have it?
JUDGE HODGE: Yes.
MR HEXT: You will see from that, not just by way of comparison, but the claimant's cost schedule comes in at some £500,000-odd. Even if one strips out the success fees from that, you are still at a figure which exceeds £300,000. So I would submit that my costs figures are very reasonable and we should be given a sensible payment on account.
JUDGE HODGE: Yes.
Submissions by MR JONES
MR JONES: My Lord, can I just say about the principle of how your Lordship is to exercise discretion in relation to the question of whether some part of the trial was conducted in an unreasonable fashion, I don't see how making a good Part 36 offer gives you licence to run unreasonable points. It cannot do that. As a matter of principle, that cannot be right, but it's a matter for your Lordship whether your Lordship thinks it was an unreasonable point to run. As regards the amount of costs, I mean I am in a slightly invidious position, but it's nevertheless my position and one which I feel quite comfortable in advancing. Firstly, we have been in this position where we have had to put forward, for our costs schedule, the costs being claimed by Lester Aldridge, not least because they have been saying they have some sort of equitable charge over any moneys we might recover. That was potentially a difficulty if we'd won as to what was going to happen next. But it is my submission that the costs Lester Aldridge seem to run up are massively unreasonable. They are just unreasonable and that, therefore, we should not be penalised because Lester Aldridge makes our costs very high, because of course we don't have to pay them now because it was a conditional fee agreement.
JUDGE HODGE: Yes.
MR JONES: But if they were to be assessed, we would have been challenging the assessment quite strongly. They are very high. I am just staggered at -- I don't blame this on counsel, I am staggered to find that Mr Hillmith was troubled by so much work that, without even attending the trial, his fees amount to £98,000.
I can't see where that possibly comes from, but there it is.
JUDGE HODGE: There must be something wrong with the total under part 2(c). It cannot be 101,000 when there is 49, 49, plus 98.
MR JONES: Yes, there is 100,000 gone missing there somewhere.
JUDGE HODGE: Yes.
MR JONES: Quite right, the two 49s are in fact sub-totals of counsel's fees because he was on a 100 per cent uplift of his CFA.
JUDGE HODGE: Sorry, right. Yes.
MR JONES: So that is in fact only 101,000. Nevertheless, it seems -- I might, first of all, contrast Mr Hill Smith's fees with counsel fees for the defendants, which include representation at trial, of £76,000. So the whole thing looks very odd. Having, as I have done, looked at the figures there, I have difficulty in seeing what they were doing to justify the fees to that extent. Duplication of effort, I suspect. I have one specific point to make about the defendant's costs, two specific points, sorry. One is that there must be quite a significant cost involved, we don't know, it's not broken down very clearly, I don't think, but under "Document preparation and perusal" I assume must be included the preparation of the trial bundle.
JUDGE HODGE: Yes.
MR JONES: That is a task which was appropriated unto themselves by the defendant's solicitors without the consent of the claimant. It's normally the claimant's task. We would have done it at half the price, but I don't know how much of those costs there represent the preparation of the trial bundle. We certainly would have been able to do it a lot more cheaply because we wouldn't have employed people at £175 an hour to do it. The other point I have to make is -- and I am sorry to say this in presence of the transcribers -- I cannot really see what the need was for the transcribing of the transcripts.
JUDGE HODGE: Yes.
MR JONES: It's something that was -- I understand why the defendants might do it because of course they are insurers dealing with solicitor's negligence and there are all sorts of reasons why they might want to have a very careful record of what happened, but it's not a cost that, in my submission, ought to be down to the claimant because it's not something that was agreed or something that we needed. Indeed, I am bound to say I never looked at the transcript at all.
JUDGE HODGE: Well, as you can see, I have.
MR JONES: I see your Lordship has. Well, that's something that was available and saved your Lordship from having to look more closely at your Lordships notes.
JUDGE HODGE: Well, actually what tends to happen in practice is it adds to the burden, because I note things as I am working on them in my notebook and I then have to try and find the corresponding passages in the transcript. So, if anything, it adds to the burden on the judge.
MR JONES: Yes. But although this case involves significant sums of money, it's really not, I would have thought, so complex that a transcript is an essential item.
JUDGE HODGE: Yes.
MR JONES: Beyond that, my Lord, obviously there will be I suspect a detailed assessment, and there will be some losses in the assessment, no doubt, but beyond that I accept that there will be an irreducible minimum which your Lordship will find they are likely to get and that the usual principles must apply to a payment on account.
JUDGE HODGE: Yes.
MR JONES: I don't think I have been asked to ask for any specific extra time to play. Yes, we are not asking for any extra time for payment on account. We just accept what your Lordship rules upon.
JUDGE HODGE: Yes.
Submissions by MR HEXT
MR HEXT: My Lord, can I just very quickly respond on trial bundles.
JUDGE HODGE: Yes.
MR HEXT: Simply one point. Two weeks before trial there were no trial bundles. The claimant's solicitors had terminated their retainer and we were looking at preparation for what has turned into a six day trial where we had a litigant in person on the other side. If we had not taken over the bundles, then I don't know what would have happened in relation to trial bundles. I strongly suspect that we would have been in a position where we simply didn't have them at all or in any sensible form. It was inevitable that we had to do that.
JUDGE HODGE: Yes.
JUDGE HODGE: This is my extemporary judgment on the issue of costs in the claim by AW Group Limited (as claimant) against Taylor Walton (as defendant), claim number 8C11C03360.
I have just delivered a judgment on the substantive issues which lasted for some four and a quarter hours, and I now have to deal with the issue of costs. Mr Hext, for the defendant, submits that it is the defendant's who have succeeded on this claim and they should have their costs. He has taken me to two relevant admissible offers of settlement, one at page 11 of the supplemental bundle dated 27 March 2013, offering to settle for £300,000, plus costs to be assessed if not agreed. The second, at page 16 of the bundle, purporting to be a Part 36 offer, indicated that the defendant was prepared to offer the claimant £500,000, plus costs to be assessed if not agreed, in full and final settlement of the claim.
Mr Hext submits that, even without those offers, his client is the successful party and should be awarded its costs of the claim. He does not seek costs otherwise than on the standard basis, but in addition he seeks interest on costs from the date of payment at the rate of 1 per cent above base rate, which is some 1 per cent less than the rate above base rate at which I would have awarded interest on damages had damages fallen to be awarded.
Mr Jones, for the claimant, does not resist the application for costs. However, he submits that, from the outset, the defendant's attempt to deny breach of duty was a futile exercise, and one that added enormously to the length, and thus the cost, of the trial. He, therefore, submits that the defendant ought to be deprived of some part of the costs to which it would otherwise be entitled because the trial had been extended. Mr Jones submits that some two and a half days of trial could have been saved. He acknowledges that half a day was lost at the claimant's request to enable him to get up to speed in presenting the claimant's case, following the belated termination by the claimant's former solicitors (Lester Aldridge) of the conditional fee agreement on which they had been retained to act for the claimant.
Mr Hext submits that it was not unreasonable to contest the issue of breach of duty. He also makes the point that in any form of complex litigation it is almost inconceivable that the successful party will be successful on all aspects of the case. One can reasonably anticipate that even a successful party will fail on some issues. Mr Hext submits that there were substantial areas of crossover between issues of breach and matters of causation, and he would therefore strenuously resist a two and a half day reduction or anything approaching that.
Mr Hext has also drawn my attention to the costs consequences of a Part 36 offer, as set out in CPR 36.14. He acknowledges that it is a moot point whether the reference to "his costs" in 36.14(2a) is a reference to all of the costs or only those costs that are allowed after the exercise of the court's discretion, under what was formerly CPR 44.3 and is now CPR 44.2.
Irrespective of the true effect of the rule, however, Mr Hext submits that, as a matter of discretion, the defendant should be awarded all of his costs on the basis that the Part 36 offer that was made should be treated as having recognised the perceived difficulties over the issue of breach so far as the defence was concerned. The claimant chose not to accept the Part 36 offer and it should now have visited upon itself the consequences of such non-acceptance. In response to that, Mr Jones submits that it is impossible to see how the making of a reasonable Part 36 offer can entitle the offeror to litigate, nevertheless, entirely unreasonable points.
In my judgment, the defendant is clearly the successful party in this litigation and should be awarded its costs. Mr Jones does not take issue with the fact that interest should be awarded on costs at 1 per cent above base rate from the date of payment. The costs should be on the standard basis. I have to consider whether there is substance in Mr Jones's submission that I should make a deduction to reflect the fact that the defendant has been unsuccessful in contesting the issue of breach of duty.
It seems to me that I should approach the matter first not by reference to CPR 36.14 but simply as an exercise of the court's discretion as to costs generally. By the present CPR 44.2, the general rule is that costs follow the event, but the court must have regard to all the circumstances of the case, including the parties' conduct, whether a party has succeeded on part of its case, even if that party has not been wholly successful, and any admissible offers to settle.
In my substantive judgment, I have found that the claimant succeeds on the issue of breach of duty but failed on the issue of causation. Had I taken a different view on the issue of causation, I would have awarded the claimant at least £550,000, plus certain other incidental costs and expenses, plus interest. But the claimant has lost on the issue of causation and therefore comes away with nothing. The issue of breach of duty did take up time at trial. It does seem to me that a reasonable estimate of the additional time taken at trial by the breach of duty issue would have been about two days, bearing in mind, the other way, that the claimant was responsible for the loss of half a court day on the Tuesday morning. Had there been no Part 36 offer, I take the view that I would have made a reduction in the level of costs awarded. Adopting a broad-brush approach, I would probably have reduced the claimant's costs by something in the order of 20 per cent and would have awarded the defendant 80 per cent of its costs.
Should I take a different view because the claimant declined to accept the two offers which, as events have transpired, would appear to have been generous offers, which would have secured to the claimant less than they would have been entitled to if they had succeeded on the issue of causation, but which are considerably more than the nothing with which the claimant will now leave this court, other than a liability for costs?
It does seem to me that there is some force in Mr Jones's point that the making of a reasonable Part 36 offer should not give the offeror carte blanche to run unreasonable points. Nevertheless, the making of the Part 36 offer is a factor that the court should have regard to in deciding whether to make any reduction because an unsuccessful point was run and, if so, how much that reduction should be. It does seem to me that to have contested the breach of duty point, whilst it cannot be stigmatised as wholly unreasonable, was something that was unnecessary in the context of this litigation; but, equally, the claimant should have accepted the two offers that were made, given the difficulties that it had on the causation front.
I have indicated that had there been no Part 36 offer, I would have probably made a 20 per cent reduction in the defendant's recoverable costs. It seems to me that I should not ignore either the Part 36 offer or the fact that the breach of duty point was persisted in by way of defence to the claim. The appropriate course, in the exercise of the court's discretion as to costs, seems to me to be to award the defendant 90 per cent of its costs rather than the 80 per cent that I would have awarded without the Part 36 offers.
I do not consider that I am precluded from taking that view by 36.14(2a). It seems to me, sitting at first instance, that I should follow the approach as set out in the notes at para 36.14.2 at page 1146 of the current (2013) edition of the White Book, which seems to me to be correct in principle, that "his costs" must be those which would be awarded by reference to what is now CPR 44.2.
For those reasons, and in the exercise of the court's discretion, I will award the defendant 90 per cent of its costs. I then have to decide how much to award by way of interim payment. The costs statement that has been produced to the court at pages 8 to 9 of the bundle has a grand total of £197,897. Mr Jones has made a number of points in relation to that, all of which can properly be addressed on a detailed assessment. Mr Hext has invited me to award 60 per cent of the figure; that was on the basis of a 100 per cent recovery. In the event there will be a 90 per cent recovery, which means that I am looking at a figure of just under £180,000.
This is a case that has now occupied eight days' time in the High Court. It is a professional negligence claim against solicitors. In that context, the figure of just under £180,000 does not seem to me to be a figure that is likely to be the subject of massive reduction on detailed assessment; but any interim payment on account must not be in a sum greater than the minimum that the court thinks the receiving party is likely to recover on any detailed assessment.
Taking as my starting point a figure of just under £180,000, it seems to me that the appropriate sum to award by way of interim payment is the sum of £90,000.
For those reasons, therefore, I order the claimant to pay 90 per cent of the defendant's costs, to be the subject of a detailed assessment if not agreed; and I will order an interim payment on account of £90,000.
MR HEXT: Can I also assume that the interest on costs is from the date of payment to the date of today and the judgment?
JUDGE HODGE: Yes. Now, are there any other matters I need to address?
MR HEXT: My Lord, no.
JUDGE HODGE: Can I invite counsel to agree a minute of order. Now, I don't know whether you are going to be asking for an approved transcript of this judgment. If so, can it be submitted to me in the form of a Word document in the form appropriate to judgments; in other words, with paragraph numbers in the form that is usually done for judgments. If I am going to be asked to approve a transcript, then these three bundles here will need to be sent up to me in Manchester, and that is the core bundle, the bundle of transcripts I have assembled, and trial bundle A. All the other bundles should be returned to the solicitors, Bond Dickinson, because I don't need those for the purpose of the judgment. The only ones I will need will be the transcript bundle, bundle A and the core bundle.
Are there any other matters? That's another one that can go back which I don't need. There are three -- no, even more now I think -- boxes under the table which are empty which can be used for the bundles, and I will retain the bundle of submissions.
Can I thank all three counsel, one of whom is missing -- no, she is not, no. You are just occupying a lot of space and obscuring Miss McGinty. Can I thank all counsel and the solicitors concerned for their assistance in the matter?
(The court adjourned)
JUDGMENT ............................................. 1
Submissions by MR HEXT ............................. 92
Submissions by MR JONES ............................97
Submissions by MR HEXT ............................98
Submissions by MR JONES ...........................103
Submissions by MR HEXT .............................107
Extemporary judgment ............................... 108