BENJAMIN BOAKYE BOATENG v HUGHMANS (A FIRM) [2002] EWCA Civ 593

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
HIS HONOUR JUDGE RICH QC
(SITTING AS A DEPUTY HIGH COURT JUDGE)
[2002] EWCA Civ 593Case No Case No: A3/2001/0896Venue Royal Courts of Justice, Strand,, London, WC2A 2LL
Between
BENJAMIN BOAKYE BOATENGAppellantHUGHMANS (A FIRM)Respondent
Before
Lord Justice MummeryLord Justice LathamSir Christopher SladeMr David Schmitz (instructed by Thomas Watts & Co) for the AppellantMr Gavin Hamilton (instructed by Reynolds Porter Chamberlain ) for the RespondentDate 10 May 2002
[1]Sir Christopher Slade : Introduction What has to be proved by the claimant in a case where the negligence of his solicitor has consisted of the failure to give him proper advice, in order to establish a sufficient causal link between the solicitor’s negligence and the loss which he has sustained and thus entitle him to substantial damages? That is the principal issue raised by this appeal.[2]By a judgment delivered on 30 th March 2001, His Honour Judge Rich QC, sitting as a Deputy Judge of the Chancery Division, found for the claimant, Mr Boateng, on the issue of liability in proceedings for negligence brought against his former solicitors, the defendant firm Hughmans (‘the firm’), but assessed merely nominal damages in the sum of £2. He refused Mr Boateng permission to appeal. Mr Boateng now appeals from that judgment with the permission of Peter Gibson L.J., who adjourned to the appeal the hearing of an application by Mr Boateng to adduce further evidence.[3]Subsequently, Peter Gibson L.J. gave the firm permission to cross-appeal and granted them an extension of time for filing a respondents’ notice. He adjourned to the appeal the hearing of an application by the firm to adduce further evidence. The facts[4]The only witnesses who gave oral evidence at the trial were Mr Boateng and Mr Fleischmann, the partner in the firm who had acted for Mr Boateng in the relevant conveyancing transaction. Mr Fleischmann claimed to have little or no recollection of the events of 1987, the date of the transaction. The judge found that Mr Boateng himself was confused and self-deluded and that, despite his obviously sincere attempts to give honest evidence, he had to treat his evidence as wholly unreliable except where supported by documents. In the circumstances, the judge’s findings of fact as to the history of the events was based on the firm’s files, which were unfortunately incomplete. Although Mr Fleischmann told him that his practice has since changed, his evidence was that at the relevant time he, regrettably, kept no attendance notes in regard to conveyancing matters.[5]I take the facts largely from the judge’s judgment. In 1987, Mr Boateng, who had been living in the ground floor of a house known as 50 Great North Road, Highgate, for some 12 years, occupied it as the tenant of London & Quadrant Housing Association. It is common ground that his was either a secure or statutory tenancy. The rest of this three storey house (‘the property’) was vacant and the property had fallen into disrepair.[6]In 1987 Mr Boateng sought the advice of the firm as to suing London & Quadrant in order to enforce their repairing covenant obligations. London & Quadrant offered, instead of repairing, to sell the freehold of the property to Mr Boateng for £65,000. But he had no money to effect the purchase. He conceived the idea of finding builders who would finance the purchase and convert the property into three flats, of which he would retain the ground floor flat, while they took their profit from the sale of the other two.[7]During the course of 1987, estate agents instructed by Mr Boateng obtained a number of interested enquiries from persons whom he met. One enquiry came from a small private company called Balancan Ltd. (“Balancan”), represented by its director a Mr Lee.[8]The files seem to show that the transaction with Balancan envisaged was always one under which Mr Boateng, having first purchased the freehold of the property from London & Quadrant, would sell it on to Balancan.[9]The files also show that Mr Boateng saw Mr Fleischmann on 28 th April 1987. The following day, solicitors for Balancan wrote to Mr Fleischmann saying.. “In view of the fact that your client will have the option to purchase a lease of the ground floor flat on completion, we will obviously have to agree terms of lease and look forward to hearing from you.”[10]Mr Fleischmann on 11 th May 1987 replied:
“Our client agrees in principle that the above premises is [sic] to be purchased from him in the sum of £100,000 subject to contract, and that he is to be granted a lease of the ground floor flat with an option to purchase at a nominal value the freehold after conversion.”
[11]It thus appears that the transaction at that time contemplated was one under which Mr Boateng would first purchase the freehold from London & Quadrant and then sell it on to Balancan, reserving to himself an option to purchase the ground floor flat.[12]It appears, however, that at least from 1987 Mr Boateng was also conducting negotiations with possible builder/purchasers other than Balancan. On 20 th August 1987 Mr Fleischmann wrote to him saying:
“I am not certain which builders you are dealing with, although I have written to some solicitors to ascertain the proposals. Obviously, the exchange of the contracts in relation to your purchase must be simultaneous with the sale. Perhaps therefore you could telephone me and let me know which builders you are dealing with and the details of your proposals, so that I may contact them.”
[13]Mr Boateng, having identified a different builder, Stonefeathers Ltd., Mr Fleischmann wrote a letter dated 21 st August 1987 to other solicitors: “We act for Mr Boateng in connection with his current purchase of the above property from a Housing Association. We understand that you act for Stonefeathers Ltd. who have agreed in principle to purchase the property from our client for £105,000 for a 99 year lease, subject to the conditions attached to the copy letter herewith…..”.[14]It therefore appears that Stonefeathers were willing to pay £5,000 more then Balancan for the grant of a 99-year lease, as opposed to a purchase of the freehold. Mr Boateng’s evidence was that he had discussed with Mr Fleischmann the grant of a lease to Balancan. The judge rejected this evidence. However, he expressed the view that such an arrangement of the deal would have had important advantages in securing Mr Boateng’s position, of which disadvantages Mr Fleischmann should have advised him. He found that no such advice had been given.[15]Mr Fleischmann had sent a draft contract, which is not in evidence, to Stonefeathers or their solicitors on 4th September 1987. On 11 th September 1987 he also sent out a draft contract, presumably in a different form, to Balancan’s solicitors. In the event, the transaction with Stonefeathers did not proceed.[16]Subsequent discussions and negotiations ensued, which resulted in an exchange of contracts on 13 th November 1987 for the purchase by Mr Boateng of the property from London & Quadrant for £65,000 and the simultaneous exchange of contracts for the sale of the property by Mr Boateng to Balancan for £109,250. Both contracts provided for completion to take place on 11 th January 1988. The original draft of the contract sent by Mr Fleischmann to Balancan’s solicitors on 11 th September 1987 is not in evidence, but, as the judge found, with the exception of the price which had apparently not yet been finally agreed, its contents could largely be inferred from the contract with Balancan as finally executed (“the Contract”).[17]The other material provisions of the Contract were as follows: “8. Unless otherwise specified in the Special Conditions hereto the property is sold with vacant possession on completion. 9. On completion of the sale to the Purchasers the Purchasers shall forthwith submit an application for Planning Permission and use their best endeavours to obtain a reasonably satisfactory Planning Permission from the local authority for permission to convert the building into three self-contained flats and to build an extension to the rear of the building at ground floor level to a depth of 12 foot and width of 10 foot and will pursue such planning application diligently… The Purchaser undertakes to use their best endeavours to obtain such permission and if a reasonably satisfactory Planning Permission is granted for the conversion of the building into three self-contained flats and erection of the said rear extension then the Purchasers will as soon as possible after the issue of the permission, carry out the necessary structural work in order to convert the building into three self-contained flats and build the said rear extension such work to be carried out diligently and in a good and workmanlike manner as quickly as possible but in any event within 9 months of the grant of Planning Permission (such time limit may be extended by mutual agreement of the parties hereto). 10. If the local authority shall not issue a satisfactory Planning Permission for the erection of the said rear extension (the decision of the Purchaser being final and binding to this effect) then such requirement shall lapse without any claim for compensation by either party against the other but the other terms and conditions of this agreement shall remain in full force and effect. 11.On the commencement of the building works the Vendor shall vacate the premises to leave full vacant possession of the whole building and the Purchaser undertakes to provide suitable accommodation to the Vendor and the Purchaser will be responsible for the payment of rent and rates in respect thereof the Vendor being responsible for all other outgoings that may be charged in respect of the premises occupied by the Vendor. 12.As and when the conversion works in the building have been completed the Purchaser will grant Leases of each of the upper flats for a term of 125 years at a ground rent of £100 per annum and in principle the terms of such Leases shall provide: a) The Landlord will be responsible for the insurance of the building b) The Landlord will be responsible for the maintenance and repair of the structure roof foundations, external parts and internal common parts. c) Each Lessee will reimburse the Landlord a proportion of the costs based on the rateable proportion by way of contribution by way of Service Charge. d) A right of way vehicular and pedestrian along the driveway up to the front building line only but without a right to park thereon and a right of pedestrian access and only along the side passage to the rear garden.13. On completion of works referred to above the Purchaser will grant to the Vendor a Lease in similar terms to that set out in paragraph 12 above of the ground floor flat without payment of a premium or other consideration. The demise of the ground floor flat to the Vendor shall include………… [There followed a list of further rights and obligations]14. On completion of the said works and subject to the Leases of all the flats in the building having been granted the Purchaser will then transfer the freehold to the Vendor at a price of One Pound (£1.00) such completion to take place within 28 days of the granting of the Leases of the aforementioned flats.15. In the event that the Purchaser is unable to obtain Planning Permission for the conversion of the building into self-contained flats and or is unable to complete such works through no fault of their own then the obligation upon the Purchaser to grant the Vendor a long Lease of the ground floor flat shall lapse and in lieu thereof the Purchaser will pay the Vendor the sum of ONE HUNDRED THOUSAND POUNDS (£100,000) whereupon the right of the Vendor to have a\ Lease of the ground floor flat shall lapse and full vacant possession of the whole of the building will remain solely with the Purchaser and neither party shall have any other claim against the other…. 16.The works of conversion are to be carried out by the Purchaser in accordance with specification [sic] and plans to be presented to the Vendor for their information only with such reasonable variations and modifications thereto as the Purchaser shall from time to time require without the necessity of obtaining any formal consent or otherwise from the Vendor”.[18]The completion of both sales took place on 12 th January 1988. The purchase by Balancan was financed by a loan granted by Nationwide Anglia Building Society (“Nationwide”), secured by a legal mortgage dated 12 th January 1988. The judge found that Mr Boateng was aware of this mortgage. Nationwide were aware that Mr Boateng lived in the property and that he intended to continue to reside in it subject to a period while the house was being converted. He was therefore invited to sign and did sign their usual consent form, which had the effect of postponing any rights of his in the property to those of Nationwide.[19]As the judge observed, there can be no doubt that the Contract was less than a comprehensive draft to achieve Mr Boateng’s objectives and give him adequate protection. Though it was apparently contemplated that he should continue his occupation until planning permission was obtained and Balancan were ready to begin work, this important feature of the transaction was provided for only by implication under condition 11. And that condition contained no definition of the “suitable accommodation” which was to be provided for Mr Boateng on commencement of the building works. These works were very loosely defined. Most important of all, Mr Boateng was to lose all his interest in the property until completion of the works, save such rights as might arise from Balancan’s obligation to carry out the works and, after granting all the leases, including the lease to himself, to sell the freehold back to him. As subsequent events showed, Mr Boateng’s position would thus, to say the least, be precarious if Balancan, by reason of insolvency, failed to perform its obligations under the Contract.[20]After completion, Balancan, though somewhat dilatorily, applied for planning permission for four (rather than three) flats. Permission was granted on 7 th November 1988. They thereupon sought to sell the property without doing the conversion works, but were prevented from doing so by an interlocutory injunction obtained by Mr Boateng in November 1988.[21]Thereafter Balancan attempted to persuade Mr Boateng to accept offers of alternative accommodation so that they could convert the property into four, rather than three, flats. The judge summarised the various offers of alternative accommodation in his judgment at pages 16F-17C,but none were acceptable to Mr Boateng.[22]In April 1989 Balancan issued proceedings against Mr Boateng, contending that he was unreasonably refusing to vacate the property. His contention was that he had not been offered suitable alternative accommodation and that, in any event, he was only obliged to vacate if a three-flat conversion were to be undertaken.[23]On 6 th September 1990, Balancan went into liquidation. Thereafter, Nationwide took proceedings against Mr Boateng, contending that they had the right to sell the property with vacant possession pursuant to their mortgage, but these proceedings do not appear to have progressed beyond the pleading stage. On 15 th June 1993, Nationwide agreed to sell the property to Gracegrove Estates Ltd. (“Gracegrove”) for £50,000. Completion took place on 30 th July 1993.[24]In October 1993 Gracegrove realised that the planning permission would lapse unless they undertook operations to begin development by 7 th November 1993. By a letter dated 20 th October 1993, they offered to comply with all Balancan’s obligations under the Contract, if given access to enable them to begin the works covered by the planning permission. They dealt with the alternative accommodation problem, referring to condition 11 of the Contract and saying:
“Under this clause, your client undertakes to vacate the premises on commencement of the works and, indeed, if you will refer to Clause 8, you will see that the property was sold with vacant possession on completion. Your client has failed to give vacant possession. Our clients are prepared to undertake to provide suitable accommodation for your client. We understand that the ground floor flat comprises two rooms, kitchen and bathroom and our clients are prepared to provide a flat of similar accommodation to your client, and to pay the rent and rates in respect thereof. However, your client has insisted upon a payment of £12,000 in respect of suitable alternative accommodation. It is anticipated that the works will take six months to complete and the figure of £12,000 bears no relationship to the cost of providing suitable accommodation to your client.”
[25]It appears that, though that offer was refused, Gracegrove were somehow able to gain sufficient access to enable them at least to begin implementation of the planning permission. By a letter dated 6 th December 1993, their solicitors nevertheless invited a meeting, in which they offered a new agreement to carry out Balancan’s obligations or pay a lump sum for vacant possession.[26]This meeting resulted in no agreement. The judge inferred from the correspondence, in the light of Mr Boateng’s pattern of conduct, that no agreement was reached because of his continuing intransigence as to the form of the alternative accommodation which would satisfy him.[27]In July 1994 Gracegrove demanded possession from Mr Boateng. He refused and Gracegrove began proceedings in the Clerkenwell County Court, claiming possession. They were resisted by Mr Boateng. He claimed a declaration that he was entitled to remain in occupation and an order requiring Gracegrove to perform their obligations under the Contract.[28]On 12 th April 1996, Mr Recorder Susman held that while Mr Boateng had at all times remained in occupation of the ground floor of the property, Gracegrove were entitled to possession. In doing so, he rejected Mr Boateng’s contention that he had an overriding interest by reason of rights arising from the Contract or by reason of a vendor’s lien. He also held that the consent form postponed any rights of Mr Boateng to those of Gracegrove and rejected the alternative submission that Gracegrove acquired the property upon a constructive trust in his favour.[29]On 20 th June 1997, the Court of Appeal rejected Mr Boateng’s appeal from that decision. This was the last stage of the disasters which befell him following his execution of the Contract Some relevant legal principles[30]Before turning to the judge’s judgment, it may be worth highlighting a few legal principles applicable to the present case. It is by now trite law that it does not suffice for a claimant who seeks to recover substantial damages arising out of his solicitor’s failure to give him proper advice as to the risks of a proposed transaction to show that such failure occurred and that he suffered loss under the transaction. In such a case it cannot be presumed that the negligent solicitor caused the loss. The claimant has to prove a connection, sometimes called a ‘causal link’, between the negligence and the loss, which justifies making the solicitor pay substantial damages. Simple logic requires that to show such causal link, he must first satisfy the court as to what action, (if any), he would have taken to avoid the loss if the proper advice had been given. If he fails to satisfy the court on this point, then he can recover no more than nominal damages. Even if he satisfies the court that in the events which happened, the loss would have been avoided if the relevant advice had been given, the court will still have to decide whether the loss suffered was in fact caused by the failure to give such advice. Reference may be made generally to the helpful analysis in para 9-219 et seq of “Professional Negligence and Liability” (2000) under the General Editorship of Mark Simpson.[31]The leading case on causation in the context of solicitor’s negligence, which was the only authority referred to by the judge in his judgment, appears to be Allied Maples Group Ltd. v Simmons & Simmons [1995] 1 WLR 1602 . In that case Stuart Smith L.J (at pages 1609 to 1611) stated the relevant principles in terms which drew a clear distinction between the case where the defendant’s negligence consists of the giving of bad advice and the case where it consists of the failure to give proper advice, saying:
“1) What has to be proved to establish a causal link between the negligence of the defendants and the loss sustained by the plaintiffs, depends in the first instance on whether the negligence consists of some positive act or misfeasance, or an omission or non-misfeasance. In the former case, the question of causation is one of historical fact. The court has to determine on the balance of probability whether the defendant’s act, for example the careless driving, caused the plaintiff’s loss consisting of his broken leg. Once established on balance of probability, that fact is taken as true and the plaintiff recovers his damage in full”
[32]In the passage most material for present purposes, Stuart Smith L.J. continued as follows:
“2. If the defendant’s negligence consists of an omission, for example to provide proper equipment, give proper instructions or advice, causation depends, not upon a question of historical fact, but on the answer to the hypothetical question, what would the plaintiff have done if the equipment had been provided or the instruction or advice given? This can only be a matter of inference to be determined from all the circumstances. The plaintiff’s own evidence that he would have acted to obtain the benefit or avoid the risk, while important, may not be believed by the judge, especially if there is compelling evidence that he would not. In the ordinary way, where the action required of the plaintiff is clearly for his benefit, the court has little difficulty in concluding that he would have taken it…. Although the question is a hypothetical one, it is well established that the plaintiff must prove on balance of probability that he would have taken action to obtain the benefit or avoid the risk…. 3. In many cases, the plaintiff’s loss depends on the hypothetical action of a third party, either in addition to action by the plaintiff….. or independently of it….”
[33]Stuart Smith L.J. expressed no doubt that in such last-mentioned case, the plaintiff could succeed provided that he showed that he had a substantial chance (not merely a speculative one) that the third party would have acted so as to confer the benefit or avoid the risk to the plaintiff, the evaluation of the substantial chance being a question of quantification of damages. As authority this proposition, he referred to Chaplin v Hicks [1911] 2 KB 786 and Kitchen v Royal Air Force Association [1958] 1 WLR 563. Hobhouse L.J. and Millett L.J. agreed with Stuart Smith L.J.’s analysis of the law.[34]In a later case, Bristol & West Building Society v Mothew [1998] Ch 1 , Millett L.J. reiterated that in an action for negligence brought by a client against his solicitor it is necessary to distinguish between the two different kinds of case, saying (at page 11): “Where a client sues his solicitor for having negligently failed to give him proper advice, he must show what advice should have been given and (on a balance of probabilities) that, if such advice had been given, he would not have entered into the relevant transaction or would not have entered into it on the terms he did”.[35]In short, in my judgment, as the law stands, any claimant who seeks substantial damages arising from a solicitor’s negligent failure to give him proper advice must satisfy three separate conditions, namely by showing(1) what advice in all the circumstances should have been given by a normally competent solicitor; and(2) what action the claimant would on the balance of probability have taken if he had received such advice; and(3) that, in the light of (1) and (2), the loss which he has suffered was in fact caused by the failure to give the relevant advice. Only after the relevant loss has been identified in this manner will questions of quantification arise.[36]With due respect to all concerned, I think that the true issues in this case would have emerged much more clearly at a much earlier date if the pleadings, the evidence, the arguments and in due course the judgment had all focussed more clearly on these basic principles of the law of negligence. The pleadings[37]As at the fourth day of the trial (29 th March 2001), the statement of claim had already been amended and re-amended three times. The particulars of the alleged negligence and breach of contract by the firm in advising the plaintiff and conducting the sale of the property, given in paragraph 9 of the re-re-reamended statement of claim, read as follows:
“The Defendant their servants or agents (1) failed to advise the Claimant of the risk that Balancan might go into liquidation without fulfilling its obligations under the said agreement; (2A) failed to advise the Claimant that he should not part with the ownership of the freehold without obtaining i) a first legal charge from Balancan to secure the payment to the Claimant of such sum as might represent his loss in the event of Balancan’s default, or £100,000 whichever might be the less, or alternatively ii) an agreement between the Claimant and [Nationwide] providing that in the event of a default by Balancan, the Nationwide would pay to the Claimant such sum as might represent his loss in the event of Balancan’s default or £100,000 whichever might be the less. (3) failed adequately or at all to advise the claimant of the effect of the said consent to mortgage; (4) failed adequately or at all to advise the Claimant that it was inadvisable to permit borrowings on security which was prior to his interest; (5) failed to advise him to investigate the credit- worthiness of Balancan or to obtain personal guarantees from directors; (6) failed to ensure that the agreement provided i) for a detailed specification of the works which were to be carried out; ii) for the Claimant to be entitled before the completion of the same to register a notice at the Land Registry protecting the Claimant’s interests thereunder; (7) failed to pay any or any adequate heed to the Claimant’s lack of business experience; (8) failed to advise him that if he were unable to arrange a transaction which secured his interests satisfactorily, his only secure alternative would be to sell the premises at the full market price which they would obtain with full vacant possession, and to use the proceeds to buy a flat elsewhere.”
As will appear a new paragaph (9) was subsequently added to this list.[38]Three other features of the pleadings require mention. The statement of claim even after its successive amendments, never asserted what Mr Boateng would have done if he had received the proper advice. Paragraph 12A of the re-amended defence had asserted three possible courses open to him, namely(a) to proceed with the proposed deal with Balancan,(b) to proceed with a different deal with Balancan,(c) not to proceed at all. In paragraph 4B(1) of his re-amended reply, Mr Boateng admitted that these were three possible courses, but averred that there were two further possible courses open to him, namely to have dealt with a different developer or to have sold the property with vacant possession at the full market price. His pleading, however, gave no indication as to which of these alternative courses he would in fact have adopted. Mr Boateng’s application for permission to re-re-re-amend his Statement of Claim.[39]During the course of Mr Fleischmann’s oral evidence, which was given after that of Mr Boateng, and later during Mr Boateng’s counsel’s closing speech, the judge addressed questions and observations to the effect that the real problem with which Mr Fleischmann had failed to grapple was the necessity to ensure that Mr Boateng maintained an interest in the property which it was proposed to be sold to Balancan, with the intention of being returned to his ownership after completion of the development. He suggested that, instead of a sale, the grant of a lease to Balancan with provision for forfeiture would have provided an obvious solution to this problem.[40]Faced with observations to this effect, Mr Boateng’s counsel, during the course of his closing speech on 29 th March, 2001, applied for permission to re-re-re-amend his Statement of Claim, to add a paragraph (9) to his particulars of negligence in the following form: “Failed to advise the Claimant that he should not part with the ownership of the freehold but should instead grant a lease to Balancan with a provision for forfeiture if the agreement were breached”.[41]Not surprisingly, this application was opposed by counsel for the firm, coming as it did at a very late stage in the proceedings after the evidence had been closed. The Judge, however, permitted the re-re-re-amendment.[42]While the judge in a short judgment very properly gave some explanation of his reasons for giving such permission, and while we have not thought it necessary to hear argument on the point, I do not fully understand why he thought it necessary or appropriate to suggest or permit the amendment. He clearly, and in my judgment rightly, regarded the failure of the firm to advise Mr Boateng to grant a lease to Balancan instead of parting with the freehold, as being merely one instance of a more general breach of their duty to give him proper advice in regard to the proposed transaction: (see the passage from his subsequent judgment quoted in para 47 below). This final amendment was therefore not apparently regarded by him as required in order to establish liability on the part of the firm.[43]In the course of his subsequent judgment, the judge rightly pointed out (page 10B-C) that “the difficulty which those advising the claimant have struggled to overcome is to find allegations of failure on Mr Fleishmann’s part which can be related to any relevant consequential loss to Mr Boateng”. But the newly added paragraph (9) of the particulars could not have been thought to give additional support to Mr Boateng’s case in the context of causation. When he came to give judgment, the Judge made no finding that if Mr Fleischmann had advised the leasehold structure, Mr Boateng would have attempted to renegotiate the arrangement with Balancan or to enter into a leasehold arrangement with some other person. And it would not have been open to him to make any such finding since the alternative possibility of a leasehold structure was not explored in the evidence until the judge put his questions to Mr Fleischmann at the end of his evidence; and neither side had had the opportunity to explore in evidence what would have been the likely consequences if the leasehold structure had been suggested to Mr Boateng.[44]We have seen the skeleton argument presented to the judge by Mr Boateng’s counsel in his opening. While the argument clearly identified the risks to which the proposed transaction was subjecting Mr Boateng in the event of Balancan going into liquidation, it made no submissions as to the course which he would have adopted if the risks had been brought to his attention by the firm. I understand, however, that by the time that the judge came to give judgment, Mr Boateng’s counsel had presented his case in regard to causation on much the same lines as he presented it to us, without particular reliance on the leasehold structure point introduced by the judge. The judgment[45]In view of the somewhat untidy manner in which the pleadings and the hearing had developed, the judge had a difficult and unenviable task when he came to give his extempore judgment. But I have to say that in some respects I have found his process of thought a little difficult to follow, at least in regard to the question of causation.[46]As to liability, the judge rejected in clear terms the submissions that Mr Fleischmann was negligent in(a) failing to obtain personal guarantees from a director of Balancan (see judgment page 11G-12A);(b) failing to give Mr Boateng less than comprehensive advice as to the consent form in regard to the mortgage to Nationwide (see judgment pages 13G-14A). Equally clearly (see judgment page 6B), the judge regarded the failure to suggest a leasehold structure (described by him as an obvious solution) as constituting negligence on Mr Fleischmann’s part, giving rise to liability. But while he was critical of Mr Fleischmann’s drafting and failure to give advice in a number of other passages in his judgment, (see for example 6F, 8C, 13A-B, 14C, and 14F-15B), he did not in terms say which of these instances constituted a breach of the firm’s duty of care to Mr Boateng.[47]In relation to liability, however, the Judge concluded with these words: “Some provision was needed to ensure that if Balancan failed to carry out the works and grant the leases proposed, Mr Boateng would not be left without any property, being thus forced to rely upon an action for damages against a party whose default might arise through its financial failure. A leasehold structure seems to me to provide an obvious solution. In my judgment, Mr Fleischmann was negligent not to consider the problem and not to advise either as to how to overcome it or, if a solution could not be agreed, that it had not been overcome. But what damages flows from such failure? The judge then turned to the question of causation.[48]In this passage the judge had correctly identified the essential defect or “problem” in the proposed contract from Mr Boateng’s point of view, namely that it exposed him to the inherent risk of being left both without any interest in the property and without any effective remedy in the event of Balancan’s insolvency before it had done the proposed work. As I read his judgment, the judge accepted that the firm were in breach of their duty of care to Mr Boateng in failing adequately to warn him of this risk. The leasehold structure was merely one of a number of possible ways (albeit perhaps the best way) by which the problem might have been dealt with.[49]When he turned to the question of causation, the first question to which the judge should in my view have directed his mind, in accordance with the guidance given by this court in the Allied Maples case, was the question:
“What would Mr Boateng have done if the appropriate advice had been given?”
Instead of following such guidance, however, the judge seems to have proceeded to address the question of causation as one of historical fact, as if the negligence had consisted of a positive act or misfeasance. For he immediately proceeded to set out the subsequent history of the events which I have summarised above, beginning with Balancan’s application for and receipt of planning permission and culminating with the failure of Mr Boateng to reach agreement with Gracegrove, following Gracegrove’s letter of 6 th December 1993.[50]Adopting this approach, the judge appears to have considered that, first, a chain of causation between the firm’s negligence and Mr Boateng’s inability to enforce Balancan’s contact had been established without the need for further analysis and secondly, that the essential issue for his decision was accordingly whether that chain of causation had been broken. The first point emerges from a passage in his judgment (at page 18 A-C) where, immediately after referring to Balancan's liquidation, he said: “I have no doubt that this was the result, at least in part, of Mr Boateng’s unreasonable refusal to honour his obligations under the contract. Unless, however, such conduct could be said to amount to a repudiation, and it has at no time been so alleged, he could have so misconducted himself with impunity if he had had an interest in the property sufficient to secure his rights under Balancan’s contract. I accept Mr Schmitz’s argument that this misconduct does not, therefore, break the chain of causation between the negligence which I have found and Mr Boateng’s inability to enforce Balancan’s contract”.[51]The judge however, concluded that the chain of causation was broken by the failure of Mr Boateng to reach agreement with Gracegrove following their letter of 6 th December 1993, saying (at page 20C-20E): “The inference which I draw from the correspondence, in the light of Mr Boateng’s pattern of conduct, is that agreement was not reached because of his continuing intransigence as to the form of the alternative accommodation which would satisfy him. I conclude the reason why Mr Boateng did not have the benefit of Balancan’s contract granted to him by Gracegrove, was his own unreasonable refusal to accept his own obligations under the contract. This in my judgment does break any chain of causation between the defendant’s negligence and the loss of his rights under Balancan’s contract”.

The judge continued:

[52]“Gracegrove, in proceedings to which I have already referred, sought possession. Mr Boateng defended those proceedings and appealed the adverse decision. In doing so he incurred a liability in costs. I cannot say that such conduct was unreasonable because clearly his case was not unarguable. If therefore that stance had been in mitigation of his loss, then such costs would be recoverable as damages, but all that he was seeking to establish in those proceedings was Gracegrove’s liability to do exactly that which they had offered to do without admission of liability, but which Mr Boateng had refused to agree to accept, as I infer, on terms that his own obligations should be modified. These costs are not, therefore, in my judgment recoverable from the defendants”.[53]In the penultimate paragraph of his judgment, the judge did briefly address the crucial question what would have happened if Mr Fleischmann had sought to alter a deal with Balancan so as to ensure that Mr Boateng would keep an interest in the property during the period of conversion. The judge recognised the possibility that in this event the Contract would not have been executed, but said:- “It is a matter of speculation what would have happened instead. I do not find myself able to make findings as to what would have been the conduct of either Balancan or Mr Boateng or of any other party sufficient to enable me to quantify damages, other than on the basis of that which did in fact occur.”

The judge concluded:

[54]- “Mr Boating did enter into the contract, although without the protection of a continuing interest in land. It seems to me therefore that on the approach adopted by the Court of Appeal in [the Allied Maples case] I have no basis for awarding other than nominal damages for breach of the contract between Mr Boateng and his solicitors. Subject, therefore, to argument, I will award damages of £2.” He made his order accordingly. Mr Boateng’s grounds of appeal and application for permission to adduce further evidence[55]In his notice of appeal from the judgment, Mr Boateng relied on four grounds, namely that the judge erred in holding that(1) the chain of causation had been broken by Mr Boateng’s refusal to leave the property as required by Gracegrove in connection with the offer contained in the letter of 6th December 1993;(2) no damage had been proved as resulting from the firm’s failure to advise Mr Boateng to seek a personal guarantee from a person connected with Balancan;(3) he could not award damages on the footing that the Contract might not have proceeded if Mr Boateng had sought to alter the terms of the dealings with Balancan so as to ensure that he kept an interest in the property whilst the works were carried out and if such an alteration had not been possible the Contract would not then have proceeded;(4) the costs of defending the possession proceedings brought by Gracegrove were not recoverable.[56]In support of ground (1), Mr Boateng sought permission to adduce in evidence a bundle of correspondence passing between his solicitors, Thomas Watts & Co., and Gracegrove’s solicitors, Slaters, which in his submission showed that his failure to obtain a flat from Gracegrove followed a decision on the part of Gracegrove to withdraw from negotiations and disproved the judge’s finding that the chain of causation between the firm’s negligence and Mr Boateng’s loss was broken as a result of his intransigence in refusing to leave the property. The firm’s respondents’ notice and application for permission to adduce further evidence.[57]In their respondents’ notice, the firm seek to uphold the judge’s order for the reasons given by him, but, in the event that Mr Boateng succeeds on any of his grounds of appeal, would seek to vary the order on the following grounds, namely that(1) the judge ought not to have granted Mr Boateng permission to to re-re-re-amend the Statement of Claim;(2) the judge ought not to have held that the firm was in breach of duty in “failing to advise Mr Boateng that he should not part with the ownership of the freehold but should grant instead a lease to Balancan with provision for forfeiture if the agreement were breached.”[58]These two grounds were directed to liability. The firm added third and fourth grounds on which they sought to uphold the judge’s findings in relation to causation, namely that (3) the judge was wrong to hold that it was necessary for Mr Boateng’s unreasonable conduct in not accepting offers of alternative accommodation from Balancan to constitute a repudiation of his contract with Balancan, in order for it to break the chain of causation from the firm’s breach of duty; (4) further, and in the alternative, the judge was wrong to hold that this unreasonable conduct did not amount to a repudiation of Mr Boateng’s contract with Balancan.[59]In the event of this court giving Mr Boateng permission to adduce further evidence, the firm applied for permission themselves to adduce in evidence on the appeal a witness statement of a Mr John West, which had been served in the proceedings between Gracegrove and Mr Boateng. For the reasons which will appear later, however, it will not in my judgment be necessary in the event for this court to deal with any of the issues raised by the respondents’ notice Conclusion[60]At the outset of the hearing of the appeal, the court indicated that it would in the first instance wish to hear argument on the issues of liability and causation without reference to the final amendment of Mr Boateng’s pleading permitted by the judge and without reference to the further evidence sought to be adduced on both sides.[61]As to liability the judge (at pages 14F-A) had accepted that “a solicitor in Mr Fleischmann’s position was under a duty to consider whether and how the obligations which Balancan was undertaking could be enforced, and, if there would be a lack of security in doing so, to advise and warn his client”. Mr Hamilton for the firm expressly accepted this formulation of the firm’s duty and the judge’s other formulation quoted in para 47 above.[62]On his own specific admissions, given in the course of his oral evidence, Mr Fleischmann had failed to give Mr Boateng any advice at least in the following respects:(1) He never advised him of the risks attendant on entering into the Contract in the form proposed with a small private limited company such as Balancan: see transcript of evidence at page 57, lines 47-57 and page 58, lines 1-23;(2) He never advised Mr Boateng that for his protection there was a need for the Contract or some allied agreement to provide some financial security for him in lieu of his flat if Balancan were to go into liquidation: see transcript at page 59 lines 52-55 and page 60 lines 1-3.[63]The essential defect in the proposed contract from Mr Boateng’s point of view was that it exposed him to the inherent risk of being left both without any interest in the property and without any effective pecuniary remedy in the event of Balancan’s insolvency before it had done the proposed work. Any reasonably competent solicitor could in my judgment have been reasonably expected to draw this risk to Mr Boateng’s attention. Mr Fleischmann did not do so. In my judgment liability in negligence on the part of the firm has been clearly established.[64]It does not, however, follow that all the particular instances of negligence asserted in the particulars of the claim have been established. Mr Schmitz, no doubt conscious of the need to show a casual connection between breach and loss, began his argument by referring to the firm’s admitted failure to advise Mr Boateng to seek personal guarantees from the shareholders of Balancan. The evidence showed that Balancan was a private limited company with a paid up capital of only £25. Its two shareholders were Mr Lee who was an estate agent and its sole director, holding 13 of its 25 issued shares, and Mr Lane, who was a partner in the firm of Balancan’s solicitors.[65]Mr Schmitz referred to the decision of the High Court of New Zealand in Roe v Cullinane Turnbull & Partners (No.2) [1985] 1 NZLR 37 as authority for the proposition that the precaution of requiring personal guarantees from the directors or shareholders is almost invariably taken by a mortgagee who is accepting a security from a private company: (see at p.44 per Quillian J.). He submitted that there was a substantial probability, as opposed to a mere speculative possibility, that if Mr Boateng had sought such a guarantee, it would have been provided. (In this context he relied strongly, though to my mind unconvincingly, on the fact that one of the shareholders, Mr Lane, was a solicitor). The firm’s failure in this regard had accordingly deprived Mr Boateng of the chance to obtain such a guarantee. In these circumstances, it was submitted, the evaluation of the chance became merely a matter for quantification of damages: (See Chaplin v Hicks (supra)).[66]In the present case there was no evidence as to the practice (if it exists) of requiring personal guarantees from the directors or shareholders of a private limited liability company. The transaction under negotiation was not a simple one of loan and mortgage. It was of a far more complicated nature than that. The judge was not persuaded that the firm’s failure to advise Mr Boateng to seek personal guarantees from Mr Lee or Mr Lane itself constituted negligence and neither am I. Even if it did constitute negligence, however, it is in my judgment clear that no damage has been shown to have resulted from this particular failure. There was no evidence to show that either Mr Lee or Mr Lane would have been willing even to consider committing himself in this way. The chance that either of them could have been persuaded to do so, of which chance Mr Boateng is said to have been deprived, was a matter for pure speculation and in my judgment far too slender to form the basis of a claim for substantial damages.[67]As the alternative to his argument based on the guarantee point, Mr Schmitz made a much wider, and to my mind more forceful submission, to the effect that if the firm had given Mr Boateng proper advice as to the manifold risks inherent in the proposed transaction, the probability was that he would have pursued it no further and would have sold the property with vacant possession.[68]In support of this submission, Mr Schmitz naturally relied strongly on a number of answers given by Mr Boateng in the course of cross-examination (at page 14 of the transcript) to the effect that, if Mr Fleischmann had advised him that he would be better off selling the property and using the proceeds to purchase a flat, he would have followed that advice. He drew our attention to the fact that, on Mr Boateng’s evidence, there were other bidders for the property at the relevant time.[69]From an objective point of view, this would appear to have been the obviously sensible course for Mr Boateng to take, unless he or his solicitors could have secured an amendment of the proposed contract or some allied agreement sufficient to give him adequate protection. In the ordinary way, as Stuart Smith L.J. observed in the Allied Maples case, the court may have little difficulty in inferring that the client would have taken the obviously sensible course to avoid the relevant risk, if the proper advice concerning the risk had been given.[70]In the present case, however, the judge, who had had the advantage of seeing and hearing Mr Boateng give evidence, unfortunately regarded him as a wholly unreliable witness. Furthermore, he found that on a number of occasions Mr Boateng’s conduct had been unreasonable – an unreasonableness which may in part have been attributable to his manifest attachment to his flat.[71]All the evidence before the court suggested that Mr Boateng, however surprisingly in view of the condition of the property, was extremely attached to his flat. Among the other letters evidencing such attachment, the judge was referred to a letter dated 24 th September 1988 written by Mr Boateng instructing Mr Fleischmann to obtain the injunction restraining Balancan from selling the property. In the course of this letter he said:
“It is needless for me to remind you as my solicitor that this matter relates to an interest in land, a rare subject matter in a rare area to which I have a sentimental attachment with no wish whatsoever to accept either money or another property elsewhere in lieu of 50 Great North Road, as my permanent home as I have always stressed to you from time immemorial”
. This letter appears to typify his attitude to the property and his flat.[72]The judge himself, in the penultimate paragraph of his judgment, (quoted in para 53 above), though recognising the possibility that the Contract would not have been executed if the proper advice had been given to Mr Boateng, found himself unable to make findings of fact as to what Mr Boateng would have done in that event. I can see no basis for saying that he was wrong in thus holding that Mr Boateng had failed to discharge the onus of proof which fell on him in this context. In response to the argument presented to this court, there is in my judgment no sufficient material for us to make the inference on the balance of probability that, if the proper advice had been given to Mr Boateng, he would have declined to proceed with the contract and sold with vacant possession or would have taken any other specific course. Nor can I see that his case in relation to causation would have been any stronger if liability were held to arise by reason of any of the particular breaches of duty asserted in paras 1-9 of the particulars.[73]In the circumstances, though liability has been established, Mr Boateng’s claim to substantial damages must in my judgment fail, not because there has been a break in the chain of causation, as found by the judge, but because the chain of causation between the firm’s negligence and his loss has not been established in the first place. The issues concerning a supposed break in the chain of causation arising out of the failure of Gracegrove’s letter of 6 th December 1993 to be followed by an agreement between Mr Boateng and Gracegrove do not in my judgment arise.[74]In the result, though with reluctance and considerable sympathy for Mr Boateng, I would dismiss his appeal. I would make no order on the cross-appeal or on the parties’ respective applications to adduce further evidence.

Lord Justice Latham – I agree.

[76]Lord Justice Mummery – I also agree. ORDER:[1]The appeal is dismissed;[2]There is no order on the cross appeal;[3]The appellant pays the respondent's costs of the appeal and the cross-appeal, to be assessed, provided that the liability incurred while the appellant was an assisted party will not exceed the amount pursuant to section 17 of the Legal Aid Act 1989 it may be reasonable for him to pay, the determination of such amount be postponed. The costs of the appellant in relation to the appeal and cross-appeal to be assessed pursuant to the Legal Aid (General) Regulations 2000. (Order not part of approved judgment)

Cited in 3 later judgments