Greymalkin Ltd v Copleys (a firm)

Neutral Citation Number: [2004] EWHC 1155 (Ch) IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION Case No: HC 01 03356(TLC 331/03) Royal Courts of Justice Strand, London, WC2A 2LL Date: 18 th May 2004 Before : MR JUSTICE LAWRENCE COLLINS - - - - - - - - - - - - - - - - - - - - - Between : GREYMALKIN LIMITED Claimant - and - COPLEYS (a firm) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Defendants Mr Geraint Jones QC (instructed by Darwin Gray) for the Claimant Mr Andrew Macnab (instructed by Henmans) for the Defendants Hearing dates: 22nd, 23rd, 24th & 26th March 2004 - - - - - - - - - - - - - - - - - - - - - Judgment Approved Judgment Mr Justice Lawrence Collins : Greymalkin Limited v Copleys (a firm) I 1. 2. 3. 4. 5. II 6. Introduction The claimant, Greymalkin Ltd (“Greymalkin”), seeks damages against the defendant firm of solicitors, Messrs Copleys, of Huntingdon, for professional negligence arising out of Copleys’ handling of Greymalkin’s purchase of the Garden House Hotel, Hunstanton, Norfolk, together with adjacent land (“the property”) in 1993. The property is a seafront property which was purchased by Greymalkin with a view to converting it into flats, including bed sitting-rooms. In June 1993 Greymalkin purchased the property from a Mr William Stern. Mr Stern (advised by Messrs Thain & Co, of Hunstanton) had purchased the property from the administrative receivers (“the receivers”) of the previous owner Jaraworth Properties Ltd (“Jaraworth”), who had been appointed by Barclays Bank plc (“Barclays”). The property was subject to other charges, which were not overreached when the sale was made by the receivers. In these proceedings Greymalkin sought damages from Copleys for its negligence in failing adequately to check the title adduced by Mr Stern, arising in particular from their failure to undertake a proper company search of Jaraworth, which had given charges not only to Barclays, but also to three other lenders. Liability has been accepted by Copleys. On March 10, 2004 their solicitors wrote to Greymalkin’s solicitors: “……… we advise you that we are instructed to admit that the defendant acted in breach of contract and negligently in failing to inform the Claimant, by its agent Michael Quayle, before completion of the sale by Stern to the Claimant on the 10 June 1993, that there were three outstanding charges over the property, created by Jaraworth Ltd which would not be overreached by the sale by Jaraworth acting by its receivers to Stern and consequently the property would remain subject to those charges on completion of the sale by Stern to the Claimant.” The issues in the trial therefore related only to causation and damage. These proceedings were commenced as long ago as November 1998. The trial was originally fixed for November 2002, but the trial date was vacated after Greymalkin re-pleaded its case. The assessment of damages is complicated by three factors. The first is that until trial the main damages claim was put on a basis which was not supportable in law, and had to be recast at the last moment. The second factor is that the documentary evidence which formed the basis for the recast claim for damages is very thin. The third (and most important) factor is that the only person with first-hand knowledge of the matters relevant to most of the factual issues on causation and damages is Mr Michael Quayle, who was the prime mover behind the project. But he has had a series of strokes and was unfit to make a witness statement or give oral evidence. The purchase of the property By 1992/1993 the property was owned by Jaraworth. The property was unregistered land and would have had to be registered by any purchaser. It was subject to charges in favour of Barclays: a legal mortgage dated June 24, 1988 and a debenture dated February 1, 1990. It was also subject to charges in favour of three other chargees. Approved Judgment Greymalkin Limited v Copleys (a firm) 7. 8. 9. 10. Mr Quayle, a local property developer, had a scheme to buy the property, convert it into flats/bed-sitters and sell and/or lease out the flats. Mr Quayle’s company, Hill Rivers (Anglia) Ltd, was to act as project manager. As I have said, Mr Quayle did not give evidence, and the trial was not concerned, except incidentally, with the way the scheme was implemented. Neither side was concerned to develop the detail of the very unsatisfactory (and, it seems, dishonest) way in which the scheme was put together by Mr Quayle. It is not necessary for me to deal with it except by way of background. I will summarise what appears from the correspondence and the witness statements to have happened, but it is not necessary for me to make any findings of fact in relation to the period before Greymalkin purchased the property. In 1992 the receivers instructed local and London agents to market the property at £175,000 (a figure which appears from the report of Mr Adams-Cairns, to which I refer below). Mrs Thain, the sole principal of Thain & Co, was instructed in July/August 1992 by Mr Quayle to act for what Mr Quayle described as the Garden House Hotel syndicate to purchase the property from the receivers and re-sell it. At around the same time Copleys (who had acted for Mr Quayle for some years) were instructed to act for Mr William Morgan, a stud manager and a business associate of Mr Quayle, in the purchase of the property from the syndicate for £245,000. By late 1992 the documents no longer refer to the Garden House Hotel syndicate. Instead, they indicate that the purchaser from the receivers was to be a Mr William Stern, about whom there is no evidence and about whom nothing is known. His address is variously given in the documents as Alderney or Johannesburg, and in a power of attorney in favour of Mr Quayle he is described as a trader in oriental artefacts. In early 1993 Mr Barry Hawkins (a local surveyor) became involved with Mr Morgan in the purchase of the property. Greymalkin was incorporated or acquired as a vehicle to purchase the property. It was incorporated on March 30, 1993. Its registered shareholders and directors were at all material times Mr Hawkins and Mr Morgan. In addition, Mrs Elizabeth Quayle (Mr Quayle’s then wife) was to have an interest in the company, but it would seem that the amount of that interest was never determined. The purchase was to be financed by loans from Barclays and from Mr Morgan and Mr Hawkins. In addition, Greymalkin would lease one of the flats to Mr Morgan. 11. Contracts between Jaraworth, acting by the receivers, and Mr Stern for the sale and purchase of the property for £130,000 were exchanged on April 8, 1993, with completion fixed for May 28, 2003. 12. What Mr Morgan and Mr Hawkins did not know, when Greymalkin purchased the property in June 1993 (back-to-back with Mr Stern’s completion of his purchase), was that Mr Quayle had arranged for the property to be bought for £130,000 by Mr Stern, and then sub-sold to Greymalkin for £240,000 at a substantial profit to Mr Stern, from which Mr Quayle was paid a commission by Mr Stern. III 13. The title problem About a week after the contract was executed, Mrs Thain told Mr Quayle that she could no longer continue to accept instructions in the matter. Mr Stern did not complete on May 28, 1993 (presumably because the re-sale to Greymalkin was not by Approved Judgment Greymalkin Limited v Copleys (a firm) then in place), and the receivers served a notice to complete. The sale by the receivers to Mr Stern was completed (except for registration) on June 10, 1993. On the same date the property was transferred by Mr Stern to Greymalkin. Copleys acted for both Mr Stern and for Greymalkin in that transaction, receiving instructions on behalf of both from Mr Quayle. Copleys acted for both Greymalkin and Mr Morgan on the sale of one of the flats to Mr Morgan, on the instructions of Mr Quayle. It would seem from the documents that the original plan was that Mr Morgan was to buy four flats from Mr Stern for £59,000, and he signed a contract for the purchase on April 16, 1993. Mr Quayle also owned part of the property, namely part of the car park. The purchase by Greymalkin from Mr Stern was funded in part (in the sum of £155,000) by Barclays. Mr Morgan and Mr Hawkins lent Greymalkin £85,000 to make up the balance. Planning permission for the development of the property was granted after completion of the sale by Mr Stern to Greymalkin. The permission was for 8 flats and 27 bedsitters. As I have said, Mr Morgan and Mr Hawkins did not know at the time that the vendor was Mr Stern, nor that Mr Quayle received, as Mr Stern’s agent, a commission of £18,000 from Mr Stern on the sale. Nor can they have known that Mr Stern had paid only £130,000, and that Mr Stern and Mr Quayle were sharing in an immediate profit (after expenses) of about £105,000. In the witness box Mr Hawkins said that he was not concerned about this if the price paid by Greymalkin was fair, and if Mr Quayle had given Mr Stern services in exchange for the commission. This is a very odd attitude, especially given that the expert valuation by Mr Adams-Cairns (below, section VII) would support the conclusion that it was Mr Stern (and not Greymalkin) who paid a fair price for the property. In the circumstances, any sale by the receivers could have been made either (a) by the receivers, or (b) by the bank as mortgagee (either in possession or not). A sale by the mortgagee in possession would have overreached the interests of holders of other charges over the property, whereas a sale by the receivers would not. Because the sale to Mr Stern was made by the receivers, the interests of the three other chargees (Property Lending Trust; TCB, later First National Commercial Bank; and Benchmark Bank plc) were not overreached and the property remained subject to their charges. Thain & Co were responsible for registering Mr Stern’s title to the property at Kingston upon Hull District Land Registry. In a letter dated August 5, 1993 the Land Registry first raised with Thain & Co the existence of the three charges and asked Thain & Co to lodge releases of the property from the charges. On September 22, 1993 Thain & Co notified Copleys and also wrote to the Land Registry querying the need for releases. On October 8, 1993 Mr Ross of Copleys wrote to Mr Quayle asking for payment of the land registration fees, without informing Mr Quayle of the Land Registry’s requisition. Barclays pressed Copleys in November and December 1993 for the charge certificate. On November 29, 1993 the Land Registry repeated its requisition for releases, and did so again on January 17, 1994, when it said that the application would be held in abeyance for two months pending release of the charges. On January 19, 1994 Thain & Co informed Copleys of the problem with registration, when Mrs Thain said “this problem is as much yours as it is mine on the basis that you did not raise any Requisitions in connection with these matters any more than I did!” Copleys 14. 15. 16. 17. 18. Approved Judgment Greymalkin Limited v Copleys (a firm) 19. IV 20. 21. 22. informed Mr Quayle of the problems with registration by telephone on February 3, 1994 and formally informed Greymalkin, and Mr Morgan, of the problem by letters dated February 22, 1994, which had been drafted in consultation with Mr Quayle. Mr Ross’ original draft said that the solicitors acting for Mr Stern had discovered the existence of the charges, and that he was endeavouring to liaise with the solicitors with a view to them dealing with the matter as soon as possible. When the matter was sorted out they would need to look into the matter of compensation. The letter as sent omitted Mr Stern’s name, and referred only to “the previous purchaser.” Mr Morgan and Mr Hawkins did not know of Mr Quayle’s connection with Mr Stern, and the letter gave a most misleading impression. On February 23, 1994 Mr Morgan wrote to Mr Ross: “…someone has blundered and should compensate us for doing so. The finger of suspicion points to Miss Thain, I imagine …” In March Copleys informed Barclays of the problem. Claims against Thain & Co and Mr Stern and the sale of the property On April 18, 1994 Hewitson Becke & Shaw, the solicitors for Barclays, asked Greymalkin for proposals to repay its current account balance of £30,020 and its commercial mortgage account of £155,000. On May 5, 1994 Copleys replied to say that the delay in registration was caused by Mrs Thain’s failure to take into consideration the fact that the appointment of a receiver by Barclays had crystallised earlier floating charges, and that they had suggested that she approach the prior mortgagees to obtain releases. Hewitson Becke & Shaw re-iterated their demand for proposals to repay the amounts due. Copleys requested on May 23, 1994 a further extension of the loan while the registration point was resolved. Copleys and Mr Quayle then prepared a substantial claim by Greymalkin against Mr Stern of some £550,000 (including loss of the purchase price and the potential proceeds of sale of flats). This was intended to serve as the basis for a claim by Mr Stern (for whom Copleys were also acting) against Thain & Co on the theory that Thain & Co would have to indemnify Mr Stern for any claims made against him by Greymalkin. On July 1, 1994 Copleys put Thain & Co on notice of the claim, and Thain & Co referred the matter to the Solicitors Indemnity Fund (“SIF”). On August 2, 1994 Copleys wrote to SIF to say that Mr Stern’s claim would be by way of indemnity for losses suffered by the sub-purchasers, i.e. Greymalkin. Copleys asked SIF, and subsequently Mills & Reeve, who were instructed by SIF to act for Thain & Co, for interim payments to cover the bank interest. The request was refused. On behalf of Mr Stern, Copleys instructed Mr Yelton of counsel to advise on the claim against Thain & Co. In October 1994 (and again in July 1995) he advised that Thain & Co would be liable to pay damages to Mr Stern in respect of any sum he might have to pay to Greymalkin (and Mr Morgan). Proceedings were issued on behalf of Mr Stern in March 1995, and served in April 1995. A schedule of loss (prepared in consultation with Mr Quayle) showed that Mr Stern had paid Mr Quayle £18,000 on the sale to Greymalkin. The basis of the claim was the loss of Mr Stern’s profit of £105,000 on the sale to Greymalkin, and Greymalkin’s claim against him for loss of profit and wasted expenditure of some £620,000 (including £207,000 loss of profit; £240,000 purchase price and £250,000 repair of vandalism and maintenance). In December 1994 Copleys had informed Barclays that the claim was likely to be £600,000, and in February 1995 they told Mrs Quayle that the claim would be in Approved Judgment Greymalkin Limited v Copleys (a firm) 23. 24. 25. 26. V 27. excess of £900,000. In August 1995 they told Lloyds Bank, Mr Morgan’s bankers, that the claim might exceed £1 million. On February 28, 1995 Mr Ross told Mr Quayle that he could not act for Greymalkin in any claim against Mr Stern. On April 7, 1995 Henmans (who had been instructed by SIF in connection with a possible claim against Copleys) advised Copleys that Greymalkin, Mr Quayle and Mr Morgan had a claim against Copleys, and that SIF would wish to settle Mr Stern’s claim and then use the arbitration procedure to resolve the apportionment between Thain & Co and Copleys. On May 23, 1995 Henmans expressed doubts about whether Copleys should continue to act for Mr Stern in view of the actual or potential conflict of interest. Nevertheless Copleys continued to assert the claims both on behalf of Mr Stern and (indirectly) of Greymalkin, but they ceased to act for Greymalkin in September 1996. It would seem from the correspondence that in October 1996 Copleys were informed that the Stern litigation had been taken over by Messrs Orchards. By then no defence had been filed (and the correspondence even suggests that no statement of claim had been served, but this may be an error on the part of Thain & Co’s solicitors) and Mr Stern had left the country. By late 1997 nothing had happened, and Copleys were still on the record. On December 18, 1997 Copleys wrote to Mills & Reeve to say that they understood that Messrs Ward Gethin had been instructed by Mr Stern, and that if they did not file a notice of acting, Copleys would apply to come off the record. I was not told what happened to those proceedings, but it is plain that they went nowhere. Discharge of the three charges was effected by Thain & Co’s professional indemnity solicitors, Mills & Reeve (who had recommended that course in May 1995, as had counsel in July 1995), in 1996, at a cost of £31,500, which included £1,500 legal fees. It was paid by Thain & Co’s insurers, and therefore involved no cost to Greymalkin. Subsequently Mr Stern’s transfer of the property to Greymalkin, Greymalkin’s transfer of land at the rear of the property to Mr Quayle and Greymalkin’s transfer of Flat 1 to Mr Morgan were registered by August 1996. Greymalkin’s position in these proceedings was that by the time the title was registered in May 1996, the property had deteriorated, and property regulations had changed, so that the costs of conversion were estimated at £500,000, and the profit margins would be doubtful unless Greymalkin could recover its losses. But when it became clear that the action against Mr Stern would not be fruitful, Greymalkin at the insistence of Barclays gave up hope of completing the development and sold the freehold. The local authority had also threatened to make a compulsory purchase order. The new developers completed the project. In early 1999 Greymalkin decided to sell the property. It sold the property for £160,000 to Norfolk Property Investment on March 31, 2000. The price was apportioned as to £129,000 to Greymalkin, £25,000 to Mr Morgan for the lease to Flat 1, and £6,000 to Mr Quayle for part of the car park which was registered in his name. The purchasers ultimately developed the property as 20 flats, and Greymalkin’s evidence is that the development has been successful in terms of sales. The present proceedings On November 16, 1998 Greymalkin commenced proceedings against Mr Stern and Copleys by writ issued in the High Court, Queen’s Bench Division, Cardiff District Registry: (a) as against Mr Stern, Greymalkin claimed damages for breach of an Approved Judgment Greymalkin Limited v Copleys (a firm) express, alternatively implied, term of the contract of sub-sale between Greymalkin and Mr Stern that, at the date of the purported sub-sale, Mr Stern was able to convey legal title in the property to Greymalkin and/or that it would be so conveyed, a term that was breached by reason of the presence of the three charges; (b) as against Copleys, Greymalkin claimed damages for professional negligence in failing (inter alia) to advise Greymalkin of the existence of the charges; (c) Greymalkin claimed against both Mr Stern and Copleys damages (in the sum of £874,468.99) based on the profit it claimed to have lost on sales and rentals and additional costs of refurbishment. In March 2001 Mr Stern was dropped as a defendant. The proceedings were transferred to the Chancery Division, and trial was fixed for November 2002. By order of Master Price dated December 13, 2001 evidence as to value was to be given by a single expert jointly instructed. The joint instructions asked for opinions as to (a) the open market value of the property in June 1993 with Greymalkin registered as proprietor; (b) the open market value in June 1993 with the charges in place; (c) the open market value in February 1994 both subject to and free from the charges (and ignoring the agreed flat sales); (d) the open market value at the date of sale in March 2000. The well-known valuer, Mr Adams-Cairns of FPD Savills, produced a report in October 2002. The November 2002 trial date was vacated when Greymalkin sought to make substantial amendments to the statement of claim. In particular it sought to amend to put the damages on the basis of costs of extrication. It also sought to amend to plead that Copleys failed to advise Greymalkin in August 1993 of the requisitions raised by the Land Registry and of the fact that there could be no certainty that the property could be registered with unencumbered title and/or that the period of time which might elapse while the title issue was resolved would be indeterminate; that if Greymalkin had been so advised it would not have undertaken expenditure on the property between August 1993 and February 1994; that the claim by Mr Stern against Thain & Co included all properly recoverable loss and damage incurred by Greymalkin, and had good prospects of success, whereas in fact it had no prospects of success as it was not competent for Stern to claim losses against Thain & Co on behalf of Greymalkin; and that led Greymalkin to delay considering and taking active steps to extricate itself given that Copleys had led it to believe that its wasted expenditure and loss and damage would be compensated by a payment of damages in the claim by Mr Stern against Thain & Co. On November 4, 2002 Ferris J adjourned the trial date, and refused permission for the amendments on the ground that (a) the amendment relating to the failure to inform in August 1993 was statute barred; and (b) if (which was doubtful) the other amendments to which I have referred pleaded a cause of action, that cause of action was also statute barred. He said that if they were relevant to the allegation that the costs of extrication had been increased, then they might be pleaded by way of reply. The allegations against Copleys about the conduct of the claim by Mr Stern are now therefore pleaded in the reply served on January 31, 2003. Consequently, in these proceedings by the amended statement of claim Greymalkin claims that if it had been advised of the want of good title it would not have completed the purchase; when Greymalkin became aware that it might not obtain good and marketable title, it desisted from progressing the renovation and conversion 28. 29. 30. 31. 32. Approved Judgment Greymalkin Limited v Copleys (a firm) works, and secured the property as best it could by boarding it up, putting barbed wire round it, and visiting it periodically; by the time that the defect was remedied in June 1996, the property had very substantially deteriorated, and the work done to it between June 1993 and February 1994 had to be redone; Greymalkin’s debt to Barclays, the increased cost of renovation and conversion, and financial costs were such that Greymalkin reasonably took the view that it was no longer commercially viable to pursue the project, and that it might need to extricate itself from its then weak financial position by selling the property for the best price reasonably obtainable, depending upon the outcome of its claim for compensation, and the speed with which it was dealt with; Barclays would not extend further finance or facilities; to extricate itself Greymalkin sold the property on the open market for the best price reasonably obtainable, namely £160,000 on March 31, 2000 (of which £129,000 was attributable to Greymalkin’s interest). In these proceedings Greymalkin continues to claim, for the purposes of the assessment of damages, that Copleys misled Greymalkin into believing that compensation would be paid by Thain & Co via an action brought by Mr Stern and that Greymalkin could therefore look forward to completing its development once it had received compensation; that Copleys knew that interest charges continued to accrue on Greymalkin’s indebtedness and yet encouraged Greymalkin to await the envisaged compensation so as to be able to complete the project; and that Copleys probably acted as they did, realising that if Greymalkin obtained compensation, completed the project (at a profit or at least with no significant losses) the inevitable claim against Copleys would thereby be reduced. Damages A schedule to the amended statement of claim served in November 2002 claimed (1) Copleys’ fees for substantiating title: £6,614; (2) renovation and conversion work from June 1993 to February 1994: £46,632; (3) cost of repairs to vandalised and damaged property: £5,605; (4) financing charges, consisting of (a) Barclays: £287,000; (b) interest payable to directors to indemnify them for interest paid by them on loans taken to lend money to Greymalkin: £9,879; (c) £115,261 loan from a Mr Greig; (d) £270,884 loans from Mr Morgan and Mr Hawkins; (5) management time of Mr Morgan and Mr Hawkins: £19,520; (6) agents’ fees on sale: £1,232. This amounted to a total of £762,629, and the claim was for £693,000, after giving credit for the amount realised on sale £129,000 less £96,000 paid to Barclays, and amounts paid by loans from directors to cover costs (£28,691), and interest. An amended schedule served shortly before the trial claimed a total of £635,218. In this schedule the costs of repairs are not included, and the financing charges are amended so that the figure for Barclays is £324,943, the loan from Mr Greig is stated to be £144,069 and the loans from Mr Morgan and Mr Hawkins are said to be £204,868. It is established that the mere acceptance of a loan cannot amount to a loss causing damage, although a loss may result from the use to which the loan moneys are put: Galoo v Bright Grahame Murray [1994] 1 WLR 1362, 1369. But no such resultant loss was pleaded. In response to concerns expressed by me that Copleys were right in contending that the schedules had been prepared on a basis which was not in accordance with principle, a yet further schedule was produced in the course of the hearing. 33. VI 34. 35. 36. Approved Judgment Greymalkin Limited v Copleys (a firm) 37. 38. 39. The new schedule of wasted expenditure/extrication costs gave details of direct expenses of about £115,000 on the property (including some £13,000 to Chapel Lane builders, and £75,000 to Hill Rivers (Anglia) Ltd and subcontractors); indicated direct payments of about £70,000 to Mr Quayle; and put the financing charges at £410,000 consisting of some £325,00 due to Barclays, and £85,000 on the loan accounts due to Mr Morgan and Mr Hawkins. At no time was the claim put on a clear basis, but it was ultimately accepted by Mr Geraint Jones QC for Greymalkin that there was no claim based on the loans themselves, but that the loans and the loan accounts were put forward as evidence (where other evidence did not exist) of the actual costs expended on the property. There was no detailed witness evidence of the expenditure. The documentary evidence in support of this schedule consists of a number of commercial invoices and receipts; bank statements of Mr Morgan and Mr Hawkins, summaries of the loan accounts of Mr Hawkins and Mr Morgan showing payments (especially to Mr Quayle) and some less satisfactory commercial documents such as a receipt for £75,000 from Hill Rivers (Anglia) Ltd to Mr Quayle. At the trial Mr Hawkins gave evidence about the work done by Hill Rivers (Anglia) Ltd. It became apparent, particularly from the evidence of Mr Morgan, that Mr Hawkins and Mr Morgan exercised no control over expenditure by Mr Quayle of the money they paid to him for the works. VII Mr Adams-Cairns’ valuation 40. Mr Adams-Cairns took into account (inter alia) the fact that the large number of bedsitters in the scheme would have detracted from the value of the scheme, and would have required a high level of management, and that the property was in poor condition with structural problems, part developed and vandalised. 41. 42. His valuation method was the Gross Development Value, which involves using comparables to arrive at the likely end selling prices, and then deducting the cost of construction, interest and profit, to arrive at a residual amount being what a developer could afford to pay for the opportunity at the outset. On that basis, he valued the property as at June 1993 at £130,000 “at best”, and “found no evidence or justification to support the sub-sale figure of £240,000.” The open market value in 1993 with Greymalkin not being able to become the registered proprietor until February 1996 was £85,000. This was arrived at by taking the costs of rectifying the defect in title as £31,500, and then re-running the residual calculation, which resulted in a diminution in value of £45,000. He also expressed opinions on the open market values in February 1994 (when Copleys told Greymalkin of the problem) and in March 2000 (when the property was sold), but it is not suggested by either side that these are material to the question I have to decide. Greymalkin criticised the section of his report on cash flow models in which he suggested that Mr Quayle charged invoices to the development when the materials were not used on the scheme. I accept Greymalkin’s submission that his suggestion was not based on any substantial evidence. For reasons I shall mention below, this would have made a small difference to the valuation as at February 1994. Approved Judgment Greymalkin Limited v Copleys (a firm) 43. In September 1993 Mr Hawkins obtained a report from Grounds & Co (which they said was based on limited information and had to be regarded as speculative). The report said that the property in its present partially renovated condition was worth £340,000. In their evidence Mr Morgan and Mr Hawkins criticised Mr Adams-Cairns’ approach. Mr Hawkins said that the purchase by a Mrs Schiannini of two flats for £81,500 in July 1993 backed his thoughts as to value: it was a good investment at £240,000. Mr Morgan and Mr Morgan both say that the flat/bed-sitter mix on which Mr Adams-Cairns based his valuation was not definite. In a supplemental report Mr Adams-Cairns stood by his valuation of £130,000. The property had been marketed by the receivers through two firms of estate agents at a guide price of £175,000, and the £130,000 was the best possible evidence of open market value. There was no evidence of value added so as to justify the price of £240,000 paid by Greymalkin. VIII Greymalkin’s arguments 44. 45. Greymalkin’s arguments on the points of principle are these. As regards causation, it is plain that, but for the negligence, Greymalkin would not have acquired the property. Copleys knew that the entire purchase and development was being funded with money borrowed on commercial terms. Greymalkin accepts that the original basis for its damages claim, based on the theory that it was the financing cost which was recoverable, is unsupportable. It now seeks to recover on the theory that all expenditure on, and the costs of extrication from, the venture are recoverable. If negligent advice (as distinct from negligent information) is given, the adviser is responsible for all the foreseeable loss which is a consequence of the advice being wrong: South Australia Asset Management Corp v York Montague Ltd [1997] AC 191, 214. Copleys’ duty was not simply to provide information so that Greymalkin could decide what steps to take. It is accepted that it was not Copleys’ duty to advise Greymalkin on whether to proceed with the envisaged commercial project. But it was Copleys’ duty to advise Greymalkin not to complete in circumstances where the vendor could not adduce a good marketable title, and it was Copleys’ duty to ensure that Greymalkin got a good marketable title upon completion. No reasonably competent conveyancing solicitor would do anything other than advise his client against completing if aware that upon completion his client would not get a good marketable title. Greymalkin relied in particular on Carter v Baynes & Son, unreported, 1998, where Judge Prosser QC held that a failure to advise a client that there was a restrictive covenant preventing the very development of land which he wished to undertake was a case of failing to provide advice rather than failing merely to provide information, with the consequence that the solicitors were liable for all the losses which the client had incurred in the venture. 46. This is a claim for damages which invokes the second limb of Hadley v Baxendale because Copleys accept that they knew that Greymalkin was set up as a single venture corporate vehicle; that the property was being purchased to be speculatively developed; that it was being financed entirely on borrowed funds; and that as Greymalkin intended to develop and sell off flats/bed-sitters its intention could not be achieved absent good title. 47. It was reasonably foreseeable by Copleys that any significant delay in Greymalkin being able to prove good title to intending purchasers of flats/bed-sitters would mean that such sales could not proceed. Copleys knew that Greymalkin was proceeding Approved Judgment Greymalkin Limited v Copleys (a firm) 48. 49. 50. with the development. Copleys waited until Greymalkin had expended further borrowed funds before informing Greymalkin of the title problem in February 1994. Damages are to be assessed on a cost of extrication basis (or wasted expenditure basis), and not on a diminution in value basis. The diminution in value approach is only applied where it gives rise to fair and proper compensation: Hayes v James & Charles Dodd [1991] 2 All ER 815. Greymalkin submits that the following findings of fact (in addition to those which are common ground or admitted in the pleadings) should be made: (a) in June 1993, Greymalkin would not have purchased/completed the property had it been advised by Copleys that the vendor could not adduce a good marketable title. Barclays would not have advanced the £155,000 if (as it should have done) it received an adverse report on title; (b) when Copleys were made aware of the requisitions from the Land Registry they must have realised that there was a significant risk that they would be liable in damages to Greymalkin for breach of duty; (c) Copleys’ advice/conduct in encouraging Greymalkin to pursue a claim for compensation against Thain & Co was intended to deflect a claim being made against Copleys; (d) when title was perfected on August 2, 1996 Greymalkin acted entirely reasonably in still pursuing compensation with a view to completing the development after receipt of the substantial compensation that Copleys had led Greymalkin to believe it should receive. In that way Greymalkin would have had a good prospect of trading out of its losses (over and above those for which it had received compensation); (e) in the absence of any realistic prospect of compensation being paid timeously Greymalkin had no option but to extricate itself as best it could by selling the property; (f) given that Copleys had encouraged Greymalkin to delay extricating itself, Greymalkin acted entirely reasonably in marketing the property in January/February 1999. Greymalkin is not pursuing any claim for loss of profits. The diminution in value basis is inappropriate and would be manifestly unfair. Copleys delayed informing Greymalkin of the want of title until February 1994, some 6 months after it had come to its notice; by the time that Greymalkin’s title was perfected in August 1996, the property had substantially deteriorated; the expenditure incurred until then was almost wholly wasted; Barclays was threatening liquidation of Greymalkin or to enforce its security, as Copleys knew; Greymalkin had no prospect of normal commercial funding from elsewhere (it could offer no security); the local authority was threatening a compulsory purchase order; Greymalkin’s case for damages to be paid to it had been prejudiced by Copleys advising Greymalkin that it could pursue its losses (plus a loss of profits claim) against Thain & Co without being a party to litigation but, rather, as a head of claim in Mr Stern’s action against Thain & Co (which Copleys pursued); any “wait and see” stance taken by Greymalkin was reasonable given that its own solicitors advised that the title problem was being sorted out and that Greymalkin’s losses until then were recoverable in an action by Mr Stern against Thain & Co; in fact, as happened, there was little prospect of SIF settling any claim by Greymalkin when that claim was made by Mr Stern. 51. Greymalkin accepts that it has no separate cause of action against Copleys in respect of Copleys’ negligence in advising upon and dealing with the claim, but it makes it wholly unrealistic for Copleys to contend that Greymalkin would be adequately and properly compensated for Copleys’ (now admitted) negligence by having damages assessed on a diminution in value basis. Approved Judgment Greymalkin Limited v Copleys (a firm) 52. 53. 54. 55. 56. If Mr Adams-Cairns is correct in saying that in June 1993 the property had an open market value of £130,000 with good title, but an open market value of £85,000 with the charges in place and thus with a defective title, the damages would be £45,000 plus interest from June 1993. Further sums for costs paid to Copleys may be added, but would not take that figure very much higher. Such a sum would not amount to fair and proper compensation. Mr Adams-Cairns proceeds on the assumption that a purchaser in June 1993 would have known that it would take two and a half years to register a good title at a cost of £31,500. That is unrealistic, since no properly advised purchaser would have bought the property absent a good title. The defect in title was not such as to mean only that the purchaser had to spend money to remove the defect (as with a domestic house being occupied and enjoyed whilst the defect is removed). It meant that the whole commercial venture that Greymalkin had embarked upon could not proceed. Greymalkin had no prospect of selling on flats without being able to give good title. Greymalkin was entitled to a reasonable time (with the expectation of compensation fostered by Copleys), to determine whether, with such compensation, the project could be finalised. As Copleys were negligent in their advice concerning the recovery of damages from Thain & Co (via an action brought only by Stern), Copleys cannot now be heard to complain about the delay. The principle is analogous to the principle that if damages are in fact increased by a reasonable, but failed, attempt to mitigate, all the damage suffered will be recoverable (even the increased amount). Greymalkin accepts that the mere fact that money has been borrowed does not give rise to recoverable loss and damage in a sum equal to the amount of the borrowing. Greymalkin had no funds other than those borrowed or coming from the sale off of flats. Greymalkin is entitled also to a reasonable sum for its directors’ time and efforts that are attributable to dealing with the aftermath of Copleys’ negligence. Copleys have always known and understood that Greymalkin had no funds other than borrowed funds and that they have been spent on property acquisition, development works, financing charges, funding the reasonable attempt to mitigate by paying Copleys and Mr Quayle whilst Copleys pursued the misconceived compensation payments from Thain & Co via an action brought by Mr Stern, an action designed to relieve Copleys of liability that they cannot have failed to realise would rest with themselves. There is no scope here for a hybrid approach by applying diminution in value plus some wasted expenditure. Contrary to Copleys’ submission, the wasted expenditure or costs of extrication basis is available even if the defect has been remedied: Carter v Baynes & Son at 16 and 18, where the restrictive covenant had been modified to allow the development to go ahead, but where the judge adopted the wasted expenses/cost of extrication basis. The sale of an asset after a defect in title has been rectified cannot/should not prevent the wasted expenses/cost of extrication measure being adopted because that may, on the facts, be the only reasonable step for a claimant to take. 57. Where a claimant is no longer able to undertake the commercial venture that the negligent solicitor knew that he intended to undertake, the claimant can, if it is reasonable and appropriate to do so on the facts of the case, extricate himself from the transaction and claim for his wasted expenses, notwithstanding that the defect has been remedied. There is no principle (as asserted by Copleys) that a claimant cannot Approved Judgment Greymalkin Limited v Copleys (a firm) claim damages measured on the wasted expenses/costs of extrication basis unless he seeks to extricate forthwith upon discovery of the defects in title: Watts v Morrow [1991] 1 WLR 1423. IX Copleys’ arguments 58. 59. 60. 61. 62. The burden of proof is on Greymalkin to establish the assertion that if it had been advised of the want of good title it would not have completed the purchase. Accordingly, the burden is on Greymalkin to establish that, if Mr Quayle had received correct advice from Copleys, Mr Quayle would have caused Greymalkin not to take a transfer of the property from Mr Stern at all unless the charges were removed or the defect in title had been otherwise mitigated. Greymalkin has not discharged that burden of proof in respect of the first aspect of causation. It led no evidence from Mr Quayle. Mr Quayle was the point of contact with Copleys for Greymalkin (and Mr Morgan and Mr Hawkins), and was the person to whom the correct information should have been given. Mr Quayle was the person who would have decided Greymalkin’s course of action if the correct information had been given. The contract between Mr Stern and the receivers contained a number of clauses which restricted Mr Stern’s ability to object to the title offered by the receivers, even if the charges had been identified by Thain & Co. The draft transfer expressly excluded any covenants for title being given by Jaraworth or the receivers. If Mr Stern had refused to complete, the receivers could have claimed specific performance, or could have terminated the agreement, forfeited the £13,000 deposit and claimed damages. Since the sales by the receivers to Mr Stern and by Mr Stern to Greymalkin were (and were always intended to be) back-to-back, and that therefore funds to be provided by Greymalkin would fund Mr Stern’s purchase from the receivers, it is unlikely that Mr Stern would have been willing or able to complete without those funds. In the circumstances, Mr Quayle, as agent for Greymalkin, may well have proceeded with the transfer by Mr Stern to Greymalkin, in the hope or expectation that he (Mr Quayle, on behalf of Mr Stern) would have been able to have the problem sorted out by Thain & Co and SIF which was the position adopted by Mr Quayle after the discovery of the charges in which case no loss would have been suffered by Greymalkin. Mr Quayle may have decided to proceed with the transaction (receivers to Mr Stern, Mr Stern to Greymalkin), make it secure and continue with the works to ensure the property did not deteriorate further pending resolution of the charge position. A claimant may only recover damages in respect of a breach of duty if he can establish that the breach is the effective or dominant cause of the loss claimed and did not merely provide the claimant with the opportunity to sustain the loss or was not merely an occurrence without which no loss would have been suffered, but which was not itself the effective or proximate cause of the loss. In determining whether the alleged breach was the effective cause of the loss or merely the occasion for the loss, the court is required to apply judicial common sense. 63. Copleys’ duty was to provide information for the purpose of enabling Greymalkin (i.e. Mr Quayle) to decide upon a course of action: it was not a duty to advise Approved Judgment Greymalkin Limited v Copleys (a firm) Greymalkin (i.e. Mr Quayle) as to what course of action Greymalkin should take: South Australia Asset Management Corp v York Montague Ltd [1997] AC 191, 214. 64. The principal question relates to the measure of damages in a case where a claimant has acquired a capital asset which, as a result of the negligence of a professional adviser, is believed to have certain qualities which it does not in fact have. Prima facie the measure of damages in such a case is the diminution in value (assessed at the date of breach, i.e. June 10, 1993), namely the difference between (a) the open market value of the asset acquired as it actually was, and (b) whichever is the lesser 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. The rationale of the diminution in value rule is that the claimant would, if correctly advised, either not have bought the property at all or would have negotiated a reduced price to reflect the defects. Either way, the claimant acquires a property worth less than it was thought to be. 65. A claimant cannot claim the cost of remedying the defects of which he should have been informed (at any rate if they exceed the diminution in value), although the costs of remedying the defect may be a guide to the quantum of the diminution in value. 66. Where a claimant would not have bought a property had he been given correct advice and extricates himself from the transaction, he may be able to recover certain costs of extrication. Where, however, he retains the property, such costs cannot be claimed. Greymalkin did not seek to extricate itself from the original transaction upon discovery of the defects in the title, nor upon the problem being cured. 67. 68. 69. Greymalkin’s claim proceeds on the contentions that it “extricated” itself from the original transaction when it sold the property in 2000 (4 years after the problem with the title was cured) and that it is entitled to sums it describes as costs of that extrication. Greymalkin has misunderstood the sense in which extrication is used in the authorities. “Extrication” refers, e.g., to disposal of a property subject to a defect, or release from a liability, of which the claimant should have been informed. It does not refer to a situation where the defect is cured and a claimant subsequently decides to sell, for whatever reason. Greymalkin is not claiming cost of extrication: it is claiming the cost of remaining at the property in an attempt to cure the problem. On the basis of Mr Adams-Cairns’ first report, the prima facie measure of loss is £45,000 as at June 1993. Copleys accept that there is no invariable rule that damages are to be assessed as at the date of breach; a later date for assessment may be used where it would lead to a result that would more accurately reflect the court’s view of what a claimant has lost. Thus where a defect in title is discovered some time after the date of breach, and particularly where the client has spent money on the property, the diminution in value should be assessed at a later date, such as the date on which the defect was discovered or the date when a loss is crystallised: e.g. Dent v Davis Blank Furniss [2001] Lloyd’s Rep PN 534 at 549. Although the property was afflicted by the charges from the time of its acquisition in June 1993, Copleys accept that those problems did not become known to Greymalkin until February 1994. Diminution in value at that date was also £45,000 (maximum). No other dates could be appropriate for assessing diminution in value. From August 1996, when the charges were removed, diminution in value by reason of the presence of the charges was nil (ex hypothesi). Approved Judgment Greymalkin Limited v Copleys (a firm) 70. 71. Copleys accept that diminution in value (assessed at the date of breach) is only the prima facie rule and that the facts may justify a departure from that rule. In the circumstances of this case, the only arguable alternative basis of assessment is that described by Morritt LJ in Gregory v Shepherds [1996] PNLR 769, 782, namely the costs incurred in removing the defects together with compensation for losses owing to their existence. But Greymalkin has advanced no claim on that basis. If made this method of assessment might include the cost of capital being tied up between discovery of the problem and the date when the problem should have been cured. But Greymalkin’s refusal to execute the necessary documentation between about November 1995 and March 1996 should reduce the relevant period, together with any diminution in the value of the property between those dates (as to which there is no evidence). The capital tied up should be measured by reference to the proper capital value of the property as at February 1994, rather than any sum that takes into account the inflated price paid by Greymalkin or the inflated value of works done. It would in any event be improper to assess damages on a basis which compensated Greymalkin for any of the following: paying more than the market price for the property; entering into an informal, undocumented and disadvantageous arrangement with Mr Quayle for works to be done to the property (resulting in Greymalkin paying too much for works done to the property and/or paying for “works” not in fact done and/or materials not in fact used at the property); borrowing too much to finance the purchase and to develop the property. X Legal principles 72. If a person is under a duty to take reasonable care to provide information on which someone else will decide upon a course of action, he is responsible only for the consequences of the information being wrong. If he is under a duty to advise whether or not a course of action should be taken, and is negligent, he is responsible for all the foreseeable loss which is a consequence of that course of action having been taken: South Australia Asset Management Corp v York Montague Ltd [1997] AC 191, at 214. The distinction was applied, e.g., in Dent v Davis Blank Furniss [2001] Lloyd’s Rep PN 534. 73. Where a claimant claims that he has suffered loss by entering into a transaction as a result of negligent advice or information provided by the defendant, the first question is whether the claimant can establish that the defendant’s negligence caused him to enter into the transaction. The claimant must then go to show what (if any) part of his loss is attributable to the defendant’s negligence: Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602; Bristol & West Building Society v Mothew [1998] Ch 1; Boateng v Hughmans [2002] Lloyd’s Rep PN 449; Dent v Davis Blank Furniss [2001] Lloyd’s Rep PN 534. 74. Consequently the fact that the claimant would not have purchased the property but for the defendant’s negligence does not mean that the defendant is necessarily liable for all the consequences which would not have happened but for the negligence: South Australia Asset Management Corp v York Montague Ltd [1997] AC 191, at 214; Cottingham v Attey Bower & Jones [2000] Lloyd’s Rep PN 591. The defendant is liable to compensate the claimant for the foreseeable consequences of the fact that it purchased as a result of the negligence. Approved Judgment Greymalkin Limited v Copleys (a firm) 75. 76. 77. 78. 79. A solicitor is generally under a duty to provide specific information or advice, and not to advise on the wisdom of transactions in general, and the loss for which he is responsible will normally be limited to the consequences of the specific information being inaccurate: for a recent example see Cottingham v Attey Bower & Jones [2000] Lloyd’s Rep PN 591. As Sir Thomas Bingham MR (as he then was) said in Reeves v Thrings & Long [1996] 1 PNLR 265 at 278 (in a judgment in which he dissented on liability): “The assessment of damages is ultimately a factual exercise, designed to compensate but not over-compensate the plaintiff for a civil wrong he has suffered. While this is not an area free of legal rules, it is an area in which legal rules may have to bow to the peculiar facts of the case.” So also Cooke P (as he then was) said in McElroy Milne v Commercial Electronics Ltd [1993] 1 NZLR 39, 41: “ … in the end assessment of damages is a question of fact: … there is no such thing as a rule, applicable to all cases: … the ultimate question as to compensatory damages is whether the particular damage claimed is sufficiently linked to the breach of the particular duty to merit recovery in all the circumstances.” In County Personnel (Employment Agency) Ltd v Alan R. Pulver & Co [1987] 1 WLR 916, 925–926, Bingham LJ reviewed the principles governing the assessment of damages in cases where a solicitor’s negligence has led to a client acquiring defective property. This judgment has been applied on numerous occasions both at first instance and in subsequent decisions of the Court of Appeal. Bingham LJ made the following points: (a) the diminution in value rule appears almost always, if not always, to be appropriate in cases where property is acquired following negligent advice by surveyors and solicitors; (b) that was not, however, an invariable approach, at least in claims against solicitors, and should not be mechanistically applied in circumstances where it may appear inappropriate; (c) consequently the court may make a more general assessment, taking account of the “general expectation of loss”, and in other cases the measure of damage may properly include the cost of making good the error of a negligent adviser; (d) while the general rule is that damages are to be assessed as at the date of breach, the rule should not be mechanistically applied in circumstances where assessment at another date may more accurately reflect the overriding compensatory rule. See also Reeves v Thrings & Long [1996] 1 PNLR 265, 278; Oates v Pitman & Co [1998] PNLR 683, 694–695; Gregory v Shepherds [1996] PNLR 769, 782. The diminution in value approach has been applied in the context of solicitors’ negligence in Ford v White & Co [1964] 1 WLR 885; Dent v Davis Blank Furniss [2001] Lloyd’s Rep PN 534; Shaw v Fraser Southwell [1999] Lloyd’s Rep PN 633; and Oates v Pitman & Co [1998] PNLR 683. Cases in which damages were awarded on the basis of the cost of rectifying the defect include Cottingham v Attey Bower & Jones [2000] Lloyd’s Rep PN 591 (where it was not argued that the diminution in value approach should be adopted: it seems that both approaches would have led to similar results). In some cases (for example where comparables were missing) the cost of rectifying the defects has been regarded as the most reliable guide to the reduced market value: Oates v Pitman & Co [1998] PNLR 683. 80. A claimant may recover the difference between what the property would have been worth but for the negligence, and the price for which he eventually disposes of it (or Approved Judgment Greymalkin Limited v Copleys (a firm) 81. 82. could dispose of it), provided that the delay in selling the property is reasonable and does not negative the causal connection between the negligence and the ultimate loss: McElroy Milne v Commercial Electronics Ltd [1993] 1 NZLR 39, as cited with apparent approval in South Australia Asset Management Corp v York Montague Ltd [1997] AC 191, at 219. The expression “costs of extrication” is used in two contexts: (1) an award of the expenses incurred by the claimant in extricating himself from the transaction (such as moving expenses), in addition to an award for diminution in value; and (2) an award on a basis other than diminution in value, where diminution in value would not be appropriate. See e.g. Watts v Morrow [1991] 1 WLR 1423, 1435. The former is a head of consequential loss, rather than a different approach to compensation. County Personnel (Employment Agency) Ltd v Alan R Pulver & Co [1987] 1 WLR 916 is an example of the latter. The property which had been acquired was a commercial underlease at a rack market rent, which had no capital value. It was held that it would have been speculative and unrealistic to calculate its substantial negative value. By contrast, there was clear evidence of the sum which it actually cost the claimants to extricate themselves from the consequences of the negligent advice they had received (per Bingham LJ at 926). The essence of the diminution in value rule is to compare two actual values. Here, the loss suffered was more naturally expressed as the liability to pay a sum over a period of time, from which the claimants had extricated themselves by payment of a capital sum, which was viewed as a reasonable attempt by the claimants to mitigate their loss (per Sir Nicolas Browne-Wilkinson V-C at 927). The appropriate measure was the cost to the claimants of extricating themselves from an onerous lease which had no capital value. The application of the diminution in value principle would have been wholly artificial: at 928. Hayes v James & Charles Dodd [1990] 2 All ER 815 is also a case where the costs of extrication in the second sense were allowed. The property in question was acquired as part of a car repair business, but was unusable due to there being no right of access. That defect led to the failure of the claimants’ business and also led to several years’ delay before the property could be sold. The Court of Appeal upheld an award of damages based on capital expenditure and expenses thrown away, including bank interest. It is possible that Carter v TG Baynes & Sons, unreported, 1998, could be explained on a similar basis, but I think it more probable that the decision is open to question. 83. Where the claimant has incurred foreseeable expenditure in improving the property then sometimes the court has applied the diminution in value approach as at a date later than the acquisition, so as to take the aggregate of the original price and the expenditure less the actual value: see Dent v Davis Blank Furniss [2001] Lloyd’s Rep PN 534; cf Watts v Morrow [1991] 1 WLR 1421, 1435; Reeves v Thrings & Long [1996] PNLR 265, 278 (Sir Thomas Bingham MR, obiter, in a judgment dissenting on liability); McElroy Milne v Commercial Electronics Ltd [1993] 1 NZLR 39. 84. In Gregory v Shepherds [1996] PNLR 769, 782, Morritt LJ said that prima facie in cases where there was a defect in the property the measure of damages was either the purchase price less the value of the property with the defect, or the costs incurred in removing the defect and compensation for losses due to its existence. In that case the claimant had purchased a holiday flat in Tenerife subject to a charge which his solicitors had failed to discover. He decided almost at once to sell it but was unable to do so in 1991 due to the defect. The defect was eventually removed without cost to Approved Judgment Greymalkin Limited v Copleys (a firm) him in 1999, and the flat was sold the following year, at slightly less than its purchase price due to a fall in the market. To have awarded diminution in value as at the date of purchase would have overcompensated the claimant, as the charge was later removed without any cost to him and the loss that he incurred as at the date of purchase was never crystallised in a sale. To have awarded diminution in value as at the date when the defect was remedied would have led to him recovering nothing. The Court of Appeal held that the appropriate compensation for a removable defect was the costs incurred in removing it plus compensation for losses caused due to its existence between the date when it should have been removed and the date when it was removed. The claimant was awarded his loss of interest over the eight years that he had been kept out of the sale price, together with his costs of procuring the removal of the charge. It was also held that he might be entitled to further compensation for depreciation in the Spanish currency over this period. XI Conclusions 85. First, I accept Greymalkin’s submission that, on the balance of probabilities, but for Copleys’ negligence, Greymalkin would not have completed the purchase from Mr Stern on June 10, 1993. Although the documents show that Mr Quayle was not acting honestly, and that he was in a real position of conflict of interest, Copleys’ theory (for that is all it amounts to) that he would nevertheless have procured Greymalkin to complete is speculative. No reasonable property developer would complete without a good marketable title. Second, although the distinction between advice and information is somewhat artificial in the present context, I consider that for purposes of causation the breach of duty was a breach of the duty to give non-negligent information by way of a report on title. Third, although Mr Ross was at fault in not informing Greymalkin of the problem until February 1994, nothing turns on that failure. Fourth, once the defect was rectified in 1996, the decision to retain the property thereafter had no causal connection with the breach of duty. If it was caused by Greymalkin’s reliance on Copleys’ advice to pursue a claim through Mr Stern, any claim that this was the fault of Copleys has nothing to do with the quantification of damages or the reasonableness of any steps taken to mitigate. In my judgment, if that complaint against Copleys is well-founded (and I express no view on that) then it breaks the chain of causation and could only be the subject of a separate claim (which has been held by Ferris J to be statute barred). As I have said, Greymalkin took the position in these proceedings that it gave up hope of completing the development when it became clear that the action against Mr Stern which it commenced in 1998 would not be fruitful. I regard this as fanciful. At no time did Greymalkin have any reason to believe that Mr Stern would be good for the money. Neither they nor anyone else involved (including the persons acting for him in Thain & Co and Copleys) seem ever to have met him. It is not necessary for me to express a concluded view (and indeed it would be wrong to do so in the absence of any cross- examination or argument on the point) but in the course of preparation of this judgment, and after having read the early correspondence, I have had doubts about whether Mr Stern existed, and whether in fact he was an invention of Mr Quayle. 86. The weight of authority supports the conclusion that prima facie the diminution in value approach to damages is the appropriate one. In my judgment there is no alternative basis of assessment which can do justice in this case. I accept that in an appropriate case the court may award the costs incurred in removing the defects together with compensation for losses owing to their existence. In this case there is no separate cost of remedying the defect in 1996 since it was paid for by Thain & Co’s Approved Judgment Greymalkin Limited v Copleys (a firm) 87. 88. 89. insurers, the direct expenses in maintaining the property until the defect must have been modest (although there is very little evidence of what they were), and the financial loss (if any) caused by title not being perfected until 1996 is not quantified and must be highly speculative. Nor is an extrication basis of assessment appropriate. In this case, there was no extrication. Greymalkin retained the property and, for the reasons I have given in connection with causation, the cost of maintaining it until 2000 cannot be regarded as costs of extrication. Greymalkin was not well served by Mr Quayle or Copleys, but it has pursued a speculative claim through Mr Stern, and then an exaggerated and speculative claim against Copleys. It is not suggested in this case that it would make any difference to the valuation whether the exercise is undertaken as at June 1993 or February 1994. As I have said, Mr Adams-Cairns valued the property as at June 1993 at £130,000 “at best”, and “found no evidence or justification to support the sub-sale figure of £240,000.” I am satisfied that Mr Adams-Cairns’ approach is valid, and that the criticisms made of his conclusion on value are without foundation, subject to one point. He disregarded an invoice from Lambourne Developments to which I shall refer below because (it seems) he had been told that Mr Quayle was in the habit of fraudulently charging invoices to the scheme: paragraphs 9.7.4 and 17.1.12. As I have said, there is no admissible evidence that he was right to take this into account. In paragraph 13.8.2 he assumed that £20,000 build costs were actually incurred. For the reasons I give below it is probable that the figure was closer to £35,000. It follows that in my view the value of the property in June 1993 without the title problem would have been £130,000. I am very sceptical of the evidence of Mr Hawkins and Mr Morgan that they were not concerned when they found out that Mr Quayle had not disclosed that Mr Stern had acquired the property for £130,000 and sold on to Greymalkin for £240,000 and that Mr Quayle had been paid a commission of £18,000. But since I accept Mr Adams-Cairns’ evidence on valuation that question is not material. The open market value in 1993 with Greymalkin not being able to become the registered proprietor until February 1996 was £85,000. I accept that, in the absence of evidence as to what actually happened, it would have been an extremely difficult exercise and might have justified a lower figure. But that figure is justified by what actually happened. The principle that the court should not speculate where it knows (the principle in Bwllfa & Merthyr Dare Steam Collieries v Pontypridd Waterworks Co [1903] AC 426, 431, to which I referred in the course of argument) applies to the assessment of damages: e.g. Curwen v James [1963] 1 WLR 748. There is no reason to take the February 1994 date for valuation. If it were the valuation date for the date of actual value, then the residual value on Mr Adams- Cairns’ approach would (if I am right in concluding that Mr Adams-Cairns underestimated the building costs expended to that date) be some £15,000 higher, which would result in an injustice to Greymalkin unless it were awarded the building costs expended to that date, or unless the value without the defect in title is as at that date also. 90. In case I should be wrong on the basic approach I will briefly indicate what would have been my findings of fact on the details of the figures. If Mr Quayle had been available to give evidence, and if the documentary evidence been adequate, this would have been a relatively straightforward exercise. But Mr Quayle could not give evidence, and the documents are very scanty. Approved Judgment Greymalkin Limited v Copleys (a firm) 91. Mr Quayle supervised the works, either through his own company, Hill Rivers (Anglia) Ltd or other sub-contractors, including Chapel Lane Builders. Arrow Roofing did some of the specialist roofing work. According to Mr Hawkins, by February 1994 the top two floors were at second fixing stage and the ground and first floor were at first fixing. Concrete flooring had been done, and Mr Hawkins estimated it would have taken about six months to complete the work. 92. Greymalkin asked me to find that work was done to the property by Chapel Lane Builders from June 1993 to October 1993. I accept that the roof/window and guttering works invoiced by Chapel Lane Builders were paid for in the sum of £10,000. I was also asked to find that Hill Rivers (Anglia) Ltd and subcontractors were paid about £135,000 for work done from October 1993 to June 1994. £75,000 is the subject of receipts dated June 10, 1994 from (a) Hill Rivers (Anglia) Ltd dated June 10, 1994 as received from Mr Quayle “as an advance for work to be undertaken” at the property to “include Architect and other professional fees” and (b) from Mr Quayle to Mr Morgan for £37,500, and to Mr Hawkins for £26,750. £36,800 is invoiced by Lambourne Developments in October 1993 for materials supplied in connection with the conversion of flats. The documentation is very slight. My findings on these sums are that (a) Greymalkin have not proved that the £75,000 as a whole was spent on the property; (b) on balance it is probable that about £35,000 was spent on the property in that period. 93. Mr Hawkins was shown in the witness box a report by Delta Dampacure Ltd dated April 20, 1993, i.e. before the purchase, to Mr Williams, an architect retained by Mr Quayle, stating that the property was in a poor state of repair, with no gutters, downpipes and sections of the roof missing, and with a visible dry rot outbreak. He was also shown letters from (a) Mr Williams to the local authority planning department dated April 28, 1993 which referred to the urgent need for repairs to the fabric of the property, and (b) a letter dated August 9, 1993 from Copleys to the receivers’ solicitors showing that prior to the purchase the property had been vandalised, and 200 roof slates had been stolen. Mr Hawkins’ reaction was that he was aware of vandalism, but that the property was not in that bad a condition. 94. Mr Morgan’s evidence was that from February 1994 Greymalkin’s main activity became litigation. Conversion work ceased, according to Mr Morgan, for a variety of reasons, including the inability to secure further borrowing, inability to sell flats, and the fear that Barclays would enforce their charge. They had no idea how long it would take the obtain clear title. Once work ceased, it was necessary to secure the property against vandalism, and deterioration due to weather. 95. Mr Hawkins says that they were not prepared to continue with the work when they learned of the problem. He arranged for the property to be boarded up, and put barbed wire on the fire escape, which was subsequently stolen. Downham Glazing did re-boarding and glazing and fixing of barbed wire. 96. 97. By March 1994 King’s Lynn and West Norfolk BC expressed concern on the condition of the property which it considered was a potential danger to the public. In April 1995 the Council required action to prevent further deterioration. On the limited available evidence my conclusion is that at all material times the property was in a poor state of repair, with dry rot problems. The correspondence between Mr Quayle and Thain & Co (which was not referred to at the trial) also Approved Judgment Greymalkin Limited v Copleys (a firm) confirms that the problem of vandalism had been identified by September 1992, and that dry rot had been identified by April 2003. Some work on the development had begun by February 1994, but thereafter no work was done except that necessary to protect the property from vandalism. 98. Claims were made in respect of the following items: (1) Architect/valuer/engineer fees of about £10,000: these were incurred after the purchase and before the discovery of the defect in title. They are claimed as wasted expenses. The architect’s and engineer’s fees make up all but about £750 of the total, and appear to have been for services which would have enhanced the value of the property, and were not wasted. Grounds & Co’s fees (£382) were for a valuation for Mr Hawkins. The purpose of the report is not known, and it is impossible to see any basis for a claim based on it. The Pannell Kerr Foster fees (£352) were in connection with the formation of Greymalkin, and there is no possible basis for a claim. (2) Legal fees of about £7,800: of this about £6,600 is for fees to Copleys in 1995 and 1996. These were originally claimed in the schedule to the amended statement of claim in November 2002 as Copleys’ fees for substantiating title, but it seems now from the bills that they were for pursuing the claim by Mr Stern (which had been prepared on the basis of the claim against him by Greymalkin). Copleys accept that if damages were awarded on the basis of costs of curing the defect some part of this might be recoverable. But I see nothing in the bills which would justify them being treated in this way. The balance of about £1,200 is for the fees to Greymalkin, Mr Morgan and Mr Quayle in connection with the sale of their interests in the property. If the £1,200 were recoverable, then at least 20% would fall to be deducted: but I accept Copleys’ submission that these fees are not recoverable in any event, since Greymalkin chose to retain the property on discovery of the defect and on removal of the defect. (3) Insurance of £878 for June 1993 to December 1993: I accept Copleys’ submission that this item cannot be claimed on any basis. It is not a loss. Greymalkin had full benefit from this insurance, which covered the period to December 30, 1993, before the problem came to light. (4) Accountancy from February 1996 to March 2004 of about £4,400: there is no explanation as to how this could be a loss. (5) Security/maintenance from May 1994 to September 1995 of about £4,600: there are no details of what the amounts of about £4,300 invoiced by Hill Rivers (Anglia) Ltd relate to. It is probable that sums of this order were expended on security and maintenance. (6) Chapel Lane Builders from June 1993 to October 1993 £13,250: I have already said that I accept that the roof/window and guttering works invoiced by Chapel Lane Builders were paid for in the sum of £10,000. But there is no evidence that the amount settled for £10,000 was wasted. £2,500 relates to work for Mr Morgan, and it is conceded that this is not recoverable. (7) Hill Rivers (Anglia) Ltd and subcontractors from October 1993 to June 1994 of about £135,000: I have already concluded that on balance it is probable that £35,000 was spent on the property in that period. Approved Judgment Greymalkin Limited v Copleys (a firm) (8) Arrow Roofing: October 1993 £890: this would have enhanced the value of the property. I accept that this payment was made, but I accept Copleys’ submission that this was probably a consequence of Chapel Lane Builders works having to be redone, and is not attributable to the defect in title. (9) Payments to Mr Quayle: (a) about £6,000 in June and December 1993 paid by Mr Hawkins “towards costs relating” to the property, and an unidentified sum of £2,633 paid by Mr Hawkins in February 1994; and (b) about £70,000 paid by Mr Hawkins and Mr Morgan (of which £26,750 is already included in the £75,000 said to have been paid to Hill Rivers (Anglia) Ltd). I would accept that until work ceased in February 1994, Mr Quayle was paid for his time/labour in acting as project manager and attending to the day-to-day matters. If Greymalkin is contending that this expenditure was wasted, I accept Copleys’ submission that it has failed to identify what the expenditure was for, and why it was wasted. The evidence relating to the period thereafter is very unsatisfactory and incomplete. I do not consider that Greymalkin, through Mr Hawkins and Mr Morgan, have given an adequate explanation of what the payments were for. (10) Greymalkin claims £19,520 for management time in respect of its directors’ time. Greymalkin has not paid the sums claimed. There is no evidence that Mr Morgan and Mr Hawkins were to be paid for their services as directors. This was (if anything) a cost of the decision to retain the property. 99. The consequence of this judgment is that the damages are £45,000 for the diminution in value, namely the difference between what the value on June 10, 1993 would have been, namely £130,000 (and not the inflated price paid as a result of Mr Quayle’s scheme) and its actual value, with the defect, of £85,000. I will hear argument on the form of order and any consequential matters if they cannot be agreed. 21