Stoll & Ors v Wacks Caller (A Firm) [2009] EWHC 2299 (Ch)

[2009] EWHC 2299 (Ch)Solicitors – Negligence: whether solicitors acting on purchase of land conditional on grant of planning permission for residential development were negligent in omitting to amend contract to include a “call-in” clauseBreach of duty - Causation – Loss of chance: whether real or substantial chance that seller would have accepted a “call-in” clauseCase No 6MA91303
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue MANCHESTER DISTRICT REGISTRY, Manchester Civil Justice Centre
1 Bridge Street West
Venue Manchester M60 9DJDate Monday 21 st September 2009
Before
HIS HONOUR JUDGE HODGE QCsitting as a Judge of the High Court
Between
Arnold StollClaimantsDarren AtkinsClaimantBrambleridge Management LimitedClaimantWacks Caller (a firm)Defendants
Mr Jonathan Ferris (instructed by Zatman & Co, Manchester) for ClaimantsMr Paul Chaisty QC (instructed by Pannone LLP, Manchester) for DefendantsHearing Hearing dates: 16 th– 18 th June, 14 th and 21 st September 2009
APPROVED JUDGMENTI direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.His Honour Judge Hodge QC
[1]By a claim form, issued on 13 September 2006, the claimants seek damages for professional negligence and breach of contract arising out of their purchase of a house and land at 2 Ringley Road, Whitefield, Manchester M45 7LB at a price of £400,000. The proceedings were originally issued in the Queen's Bench Division in London but were subsequently transferred first (by an order of Master Fontaine dated 23 November 2006) to the Manchester District Registry and then (by an order of DJ Needham dated 4 December 2006) to the Chancery Division, and were allocated to the multi-track. The defendants are a firm of solicitors (since dissolved) who acted for the claimants on their purchase of the property, the responsible fee-earner being Mr Robert Harris, now a partner in the firm of Mace & Jones. The claimants were purchasing the property (at a price of £400,000) from the registered proprietor (Mr Paul Simon) with a view to its redevelopment; and the purchase contract was conditional upon the purchasers obtaining planning permission (acceptable to them, acting reasonably) for the conversion of the existing house into two flats with a further house at the rear. Completion was to take place on the 21st day following the date of planning permission; but if the planning application was refused, or if in any event the sale and purchase was not completed for any reason within 6 months of exchange of contracts, the sale agreement was to lapse and be of no further force and effect. Although contracts were exchanged (on 24 February 2003, with a nominal deposit of £1) in the names of the first and second claimants, following the grant of planning permission (by Bury MBC on 30 July 2003) completion took place (on 19 August 2003) in the name of the third claimant (a company owned and controlled by the first two claimants), which had been incorporated on 4 August 2003. Although the point was in issue on the pleadings, Mr Chaisty rightly acknowledged that, as the transaction proceeded to completion, the defendants assumed a duty to the corporate claimant corresponding to the duty they owed to the individual claimants.[2]The proposed development never proceeded because (on 9 September 2003, and thus after completion of the purchase) neighbouring householders (Mr and Mrs Krebs) applied for judicial review of the local planning authority's decision to grant planning permission. Following the grant of permission to apply for judicial review at an oral hearing before Collins J on 6 February 2004, Bury MBC conceded that the planning consent should be quashed; and a consent order to that effect was signed by the applicants and the respondent authority on 31 March 2004 (although the order was not actually perfected until 29 April 2004). The effect was that the claimants’ planning application fell to be reconsidered by Bury MBC as if it had been received on the day the authority received the court’s order. Following the receipt (on 9 June 2004) of an offer (from Mr and Mrs Salisbury), at a price of £480,000 for the onward purchase of the house and land without the benefit of any further planning consent, the claimants immediately withdrew their planning application from reconsideration by Bury MBC. Unfortunately, and apparently due to difficulties on the part of Mr and Mrs Salisbury in effecting the sale of their existing property, the sale to them did not proceed to exchange of contracts and completion until April 2005, and then only at a price of £400,000. After allowing for the costs of the original purchase and later resale, and for interest, bank charges, and other outgoings, the claimants assert that they have suffered a loss on the transaction of £72,341.01 as at 20 April 2005 (the date of completion of the resale). This they seek to recover from the defendants, asserting that they were negligent in failing to include within the original purchase contract a “call-in” clause directed to preserving the conditionality of the contract in the event of a challenge to the grant of planning permission by way of judicial review. Had this been done, it is said that the claimants would have invoked the “call-in” clause to withdraw from the purchase prior to completion. Both liability and quantum are in dispute; but the principal issues that fall for decision are(1) whether the defendants were negligent in failing to seek to introduce a "call-in" clause into the original purchase contract and(2) the consequences if they had sought to introduce such a clause.

The trial

[3]The trial was originally listed for three days on 16-18 June 2009; but, unfortunately, the evidence was not concluded until about 3.15pm on the third day. Due to the court’s other commitments, it was not possible to resume the hearing until Monday, 14 September 2009. In the meantime, I had received written transcripts of the three days of evidence, together with detailed written closing submissions from Mr Jonathan Ferris of counsel (who appeared for the claimants), from Mr Paul Chaisty QC (who appeared for the defendants), and, finally, from Mr Ferris in reply. I was able to devote a full day to reading the transcripts (and my own contemporaneous notes of evidence) and considering the extensive written submissions before the hearing resumed. As a result, oral submissions were completed shortly before the luncheon adjournment on 14 September, when I reserved judgment.

The witnesses

[4]For the claimants, I heard from three witnesses. The first was Mr Arnold Stoll, the first claimant. His witness statement was dated 21 May 2009; and he gave evidence for about 6 hours and 40 minutes, spread over 2 days (of which some 4 hours and 45 minutes was taken up with cross-examination). Now some 76 years of age, Mr Stoll is an entrepreneur and businessman; but his experience had been in the textile business, and this was his first venture into property development. Another of the claimants’ witnesses, Mr Alex, said that Mr Stoll had come across “as a well-informed businessman”. Mr Harris described Mr Stoll as a “very astute businessman” who was “very savvy”. I find these descriptions of Mr Stoll to be accurate; but I also find him to be an unsatisfactory witness, and I regret that I can place no real confidence in the reliability of his evidence. At times, Mr Stoll was openly reluctant to engage with Mr Chaisty’s questions, particularly when directed to hypothetical situations. His memory was both poor and uneven: in answer to many questions his response was that he could not remember. For example, he could not remember whether agents had been retained by Mr Simon on his sale of the property, or even whether a “For Sale” board had been erected outside the property before Mr Stoll offered to purchase it. During the course of Mr Alex’s cross-examination, it became apparent that he had acted for Mr Simon as his estate agent on his sale of the property to the claimants. Mr Stoll was prepared to accept that Mr Harris had discussed the draft purchase contract, and had gone through clause 16 (the planning condition) with him, but he did not recall what had been said. In relation to his meeting with Mr Harris and his assistant, Ms Briony Sands, on the afternoon of 24 February (also attended by the second claimant, Mr Atkins), Mr Stoll said that it had all been a long time ago and there was not much that he could recall about the discussions. Initially, he said that he could not remember whether he had obtained a valuation of the property before exchange of contracts, although in re-examination (at T2/30) he said that “obviously” they had obtained the valuation figures in the report prepared for HSBC Bank before signing the purchase contract. In fact, that report was dated 18 March 2003, roughly a month after exchange of contracts. Perhaps unsurprisingly after more than 6 years, Mr Stoll could not remember much about the detailed conversations recorded in the contemporaneous documents. I find much of his evidence to be (perhaps inevitably) coloured by hindsight, but also dictated by self-interest. What is clear is that Mr Stoll was a highly demanding client who had been impatient to get on with the purchase of the property. I find that he considered that(1) Ringley Road (which was referred to as millionaires’ row”) was “absolutely” the road to be in in North Manchester;(2) £400,000 was a good price for the property, particularly if the claimants could get the contemplated planning permission, but that, even without such consent, it represented no more than the property was truly worth; and(3) (although Mr Stoll used various adjectives to describe the claimants’ prospects of doing so), based on the claimants’ architect’s advice, there was a “good chance” of obtaining the necessary planning permission to redevelop the property. I also find that, in Mr Stoll’s own words, as recorded in the file note of the pre-exchange meeting early on the afternoon of 24 February 2003 (at B273), “the concept” underlying the deal “was to make money”; and that, coloured by the unfortunate history of subsequent events, in evidence Mr Stoll has understated his former belief that the purchase of the property represented a “win-win” situation, irrespective of the outcome (of which he was confident) of the claimants’ planning application to redevelop the property. In particular, I reject Mr Stoll’s assertion that the property would have been of no use to the claimants without the grant of planning permission: he appreciated that the property market was buoyant and that prices were rising, and there was likely to be a profit to be made even without the grant of planning permission. In any event, as recorded in the file note of the pre-exchange meeting on 24February 2003 at B275 (on which he was cross-examined at T1/42-3), Mr Stoll was confident that there would be no relevant objection to his proposed development, and that he would secure the necessary planning permission.[5]The claimants’ next witness was the second claimant, Mr Atkins. His witness statement was dated 26 May 2009; and he gave evidence for a little over 2 hours, mainly under cross-examination. Mr Atkins is a builder with no previous experience of property development. He was interested in the project because of the opportunity it afforded to undertake the building works, and to make a profit from the development for himself rather than a third party developer. Mr Atkins had been introduced to the project by Mr Stoll; and I find that Mr Atkins relied upon him to make all the important or strategic decisions. I am satisfied that Mr Atkins was doing his best to assist the court, but his mind frequently went blank when trying to answer questions. He had had little real contact with the defendants and he had never met Mr Simon, having left all such matters to Mr Stoll who (as I find) was in full control of the situation. Mr Harris correctly recognised that Mr Atkins was being led in the transaction by Mr Stoll. Mr Atkins was clear that Mr Stoll had told him that the architects were confident about obtaining the necessary planning consent and that he (Mr Atkins) had not thought that there would be any problem in that regard. He also confirmed that Mr Stoll had been anxious to exchange contracts quickly. In other respects, I do not find that Mr Atkins’s evidence added much to that of Mr Stoll.[6]The claimants’ final witness was Mr Anthony Alex, an experienced estate agent and chartered surveyor, who traded as Alex Dines & Co. He had known Ringley Road in a professional capacity for about 30 years. In cross-examination, Mr Alex said (at T2/84-5) that he had acted for the vendor when he had sold the property (“reasonably quickly”) to Mr Paul Simon at a price of £307,000 on 25 February 2002 (B471); and he confirmed that this was both slightly less than the asking price, and also a fair price for the property at that time. A little less than a year later, he had acted for Mr Paul Simon on his sale of the property to the claimants; and he later acted for them when they came to market, first the proposed development, and then the undeveloped property. Mr Alex’s witness statement was dated 28 May 2009; and he gave evidence for about 40 minutes, mainly under cross-examination. He was a fair, straightforward, honest and reliable witness. In cross-examination (at T2/85), Mr Alex said that the residential property market had been “very buoyant” in 2002 and 2003; and that the £400,000 paid for the property by the claimants (which was less than the asking price) was “probably about the right price at the time”. He also confirmed that the rapid property growth inflation that had been seen in 2002 (approaching 30%) had been fully expected to continue into the foreseeable future, and that it had done so, resulting in his recommendation to Mr Stoll (in February 2004) to market the property without planning permission at a price of £535,000, which was “within the right territory”. When asked in re-examination if £400,000 was a fair price for the property with planning permission, Mr Alex replied that it was “a fair price for the property full stop” (at T2/96, with the emphasis supplied by me).[7]The defendants called two witnesses, both solicitors, neither of whom is exposed to the risk of any personal financial liability as a result of this litigation. The first was Mr Harris, who is (and was in 2003) an experienced conveyancing solicitor, specialising in commercial property. His witness statement was dated 26 May 2009; and he gave evidence for a little under 4 hours (of which about 3 1/2 hours was taken up with cross-examination). Perhaps inevitably after more than 6 years, his evidence was almost entirely dependant upon the documents in the relevant files maintained by the defendants. I accept the contents of those documents (whether prepared by Mr Harris or by others within the defendant firm, notably Ms Sands) as an accurate contemporaneous record of events. I accept that Mr Harris’s evidence was honestly given; and to the extent that it is supported by the contemporaneous documents, I accept the reliability of Mr Harris’s evidence.[8]The defendants’ second witness was Mr John Gower-Jones, also a commercial property solicitor. His involvement in the transaction was extremely limited, comprising one meeting with Mr Stoll on 4 August 2003 (during Mr Harris’s absence on holiday), long after exchange of contracts, and shortly before completion of the claimants’ purchase. Mr Gower-Jones’s witness statement was dated 21 May 2009; and although he was cross-examined for about 20 minutes, there was no real challenge to his evidence. Mr Gower-Jones was a careful, honest and reliable witness whose evidence I can safely accept.

The expert valuation evidence

[9]There was a joint expert’s report dated 15 April 2009 from Mr Paul Marshall MRICS of Morris Dean, Chartered Surveyors & Property Consultants, which was supplemented by his written response, dated 29 May 2009, to questions posed by Pannone LLP, the defendants’ solicitors. Mr Marshall’s conclusion (at paragraph 8.8 of his report) was that he did not consider the marketing strategy adopted by the claimants, and their professional advisor, Mr Alex, to have been inappropriate “particularly taking into account strong market conditions during 2003, 2004 and 2005, with the market remaining buoyant and house prices continuing to rise until they peaked in 2007. Whilst personally I would have felt that an initial asking price of just below £500,000 was more appropriate, I cannot state that it was unreasonable of the claimants and their agent to commence promotion at £535,000 in order to test the market. However, in view of relatively limited interest between February and September 2004, together with the level of Mr & Mrs Salisbury's offer (£480,000), I am of the opinion that the asking price should have been reduced [to £495,000] at an earlier date of say July 2004 [rather than the end of September]. It would then have been appropriate to bring forward the next price reduction [to £435,000] to say October or November 2004 [rather than mid-January 2005]. In such circumstances it is possible, but not certain, that a sale may have been achieved at a date earlier than 27th May 2005." (In fact, completion took place on 20 April 2005; see C702 and C770.) In his response to Pannone LLP's questions, Mr Marshall indicated that had the two reductions in asking price been made in July and October 2004, he would have assessed the prospects of an exchange of contracts being achieved in December 2004 at 20-50% and in January 2005 at 50-70%. (Exchange of contracts with Mr and Mrs Salisbury in fact took place on 12 April 2005: see C696.) If the property had been marketed at £430,000 from February 2004 onwards, Mr Marshall would have assessed the prospects of exchanging contracts in July 2004 at 40-50% and in August 2004 at 50-70%.

The missing witnesses

[10]I heard no evidence from Mr Paul Simon (who sold the property to the claimants); from Mr Allen Cohen, a partner in the firm of Fladgate Fielder (who acted as Mr Simon’s solicitor on his sale of the property to the claimants); or from Mr Paul Domville of PHD Design, the architects who advised the claimants on planning matters and acted for them both on their initial planning application (made 5 days before exchange of contracts on 19 February 2003), which was refused on 13 March 2003, and on the revised application submitted in or about May 2003 (see C661), which was granted on 30 July 2003 (see C665). In cross-examination, Mr Stoll confirmed that both Mr Paul Simon and Mr Domville had been available to be called as witnesses. Significantly, the claimants did not seek to adduce any evidence from their own witness, Mr Alex, as to the likely attitude of his former client, Mr Simon, to any attempt to introduce a “call-in” clause into the sale contract; and, for tactical reasons which I can readily understand and sympathise with, Mr Chaisty sensibly asked no questions on this subject in cross-examination. Mr Chaisty submits (on the authority of Wiszniewski v Central Manchester Health Authority [1998] PIQR P324 I have previously placed reliance upon this authority in the case of Lancore Services Ltd v Barclays Bank plc[2008] EWHC 1264 (Ch) at [46]; affirmed (without challenge to this point) at [2009] EWCA Civ 752. , a decision of the Court of Appeal) that I am entitled to draw adverse inferences from the claimants’ failure to call Mr Simon and Mr Domville. I am satisfied not only that Mr Simon, Mr Domville, and Mr Alex might all have given evidence of potential relevance to the issue of causation, yet the claimants did not elect to call any of them to do so; but also that the claimants have provided no satisfactory explanation for this failure. The omission is particularly telling since Mr Stoll repeatedly told the court in cross-examination (at T1/15-16 and 19) that he had no idea of what Mr Simon’s response would have been had he been asked to include a “call-in” clause within the sale contract. Mr Atkins could not assist on this issue since he had never met Mr Simon and had no idea of what he might have done: see T2/42. In these circumstances, whilst I do not draw the inference that any of these three individuals would necessarily have given evidence adverse to the claimants’ case, I am entitled to, and I do, infer that they would not have said anything to support it. In any event, the unexplained absences of Mr Simon (and, if appropriate, his solicitor) and of Mr Domville from the witness box, and the failure to adduce any evidence from Mr Alex relevant to the issue of causation, are matters which I am entitled to take into account when deciding whether the claimants have discharged the burden of proof that lies upon them on the issue of causation.

Breach of duty

[11]The primary facts relevant to the breach of duty claim are not in dispute. The solicitors acting for the seller were Fladgate Fielder, the responsible fee-earner being Allen Cohen, a partner in that firm. On 27 January 2003, Mr Harris received the draft contract from Fladgate Fielder (B197). He amended it in red and returned it to Mr Cohen “approved as amended” under cover of a letter dated 31 January 2003 (B203); and this was reported to Mr Stoll by letter dated 3 February 2003 (B204). Mr Harris’s amendments included amendments to the provisions of clause 16, which made completion conditional upon the purchasers obtaining a satisfactory planning consent (B541). On 6 February 2003, Mr Cohen returned the contract to the defendants as approved (B205) having made only two re-amendments (to clauses 8.1 and 8.6), neither of which is material for present purposes. Mr Harris received the re-amended draft on 7 February 2003; and on the same day he confirmed both to Mr Stoll (B206) and to Mr Cohen (B207) that the contract was by then in an agreed form. Exchange took place on 24 February 2003, with clause 16 in the form which appears at B260. It is common ground that at no time did Mr Harris seek to introduce any “call-in” clause into the draft contract; nor did he advise Mr Stoll (still less Mr Atkins) of the risk of any third party challenge to any future grant of planning permission by way of an application for judicial review, of the potential implications and dangers of such a challenge, or of the possibility of addressing these by way of some form of “call-in” clause. In answer to questions from the bench at the end of his evidence (at T3/73), Mr Harris accepted that he had not discussed any of his proposed amendments to the draft contract with Mr Stoll before propounding them.[12]Mr Ferris submits that Mr Harris was under a duty to warn Mr Stoll that any grant of planning permission was at risk of being revoked after completion by way of a successful third party application for judicial review; and that the risk of this happening could be addressed by including an appropriately worded “call-in” clause in the contract. Since Mr Harris failed to do so, the defendants were in breach of duty. In support of his submission, Mr Ferris argues that it is implicit in the commentary at note 1 to Form 67 (at the top of page 21) of Volume 38 (2) of the Encyclopaedia of Forms & Precedents that the inclusion of a “call-in” clause should at least be considered in any case other than “the very simplest cases such as an application for change of use or for the carrying out of relatively minor building operations where…it is unlikely that the grant of planning permission would be challenged by third parties by way of judicial review…”. He submits that in the circumstances of the present case, a “call-in” clause should have been introduced into the draft sale contract along the lines of the precedent to be found at Form 68 of the Encyclopaedia, which, Mr Ferris emphasises, is described as a form “drafted in favour of the seller”, in this case Mr Simon, rather than the purchaser. Mr Chaisty objects, with justification, that Mr Ferris never condescended to identify the precise terms of the “call-in” clause which he submits should have been(a) proffered and(b) regarded as the minimum acceptable by Mr Harris. Mr Chaisty complains that this has prevented him from properly addressing, and testing, the claimants’ case, particularly on causation, both in cross-examination and in submissions. Certainly, this omission has tended to complicate the resolution of the causation issue.[13]Initially in cross-examination, Mr Harris accepted that the defendants owed a duty to the claimants to ensure that they were not committed to purchasing the property unless and until a satisfactory planning permission was in place; but he refused to accept, in terms, that the defendants’ duty extended to ensuring that the claimants were not bound to purchase the property until that planning permission was incapable of further challenge. However, in an email internal to the defendants that Mr Harris drafted and sent on 23 September 2003 (B347-8), after the problem had come to light, he had recognised that it might have been “a mistake” not to have discussed with Mr Stoll at an early stage “the question of judicial review and extending the time for confirmation that planning permission had been obtained”; although Mr Harris then proceeded in his email to qualify this statement, and to seek to explain and excuse his conduct of the transaction. In the course of cross-examination (at T3/40-53), Mr Harris seemed to me to accept the propositions that he owed a duty to the claimants to identify, and to explain, any particular areas of risk that would not have been apparent to an inexperienced lay client; and that he should have advised the claimants, before they exchanged contracts to purchase the property, of the risks that they were potentially running by doing so without the protection of a “call-in” clause. Of course, I am not strictly bound by Mr Harris’s perception, influenced as it undoubtedly is by the benefit of hindsight, of the scope of his duties as a conveyancing solicitor. But, in my judgment, this perception is clearly right as a matter of law.[14]In his leading judgment in the case of County Personnel (Employment Agency) Ltd v Alan R Pulver & Co [1987] 1 WLR 916 at 922E Bingham LJ said that:
“If in the exercise of a reasonable professional judgment a solicitor is or should be alerted to risks which might elude even an intelligent layman, then plainly it is his duty to advise the client of these risks or explore the matter further.”
In my judgment, that observation applies to the circumstances of the present case. Mr Stoll, with no previous experience of property development, had no conception of the possibility of a third party challenge to the grant of planning permission by way of an application for judicial review. This was something to which he needed to be alerted by Mr Harris. He was left in ignorance. When he received the draft contract, and set about amending clause 16, in my judgment Mr Harris, in the course of discharging his duties as a reasonably competent conveyancing solicitor, should have considered whether it was appropriate to include a “call-in” clause. I reject the submission that there was anything in the particular circumstances of the present case that should have absolved Mr Harris from such consideration. I also reject the suggestion (in Mr Harris’s internal email of 23 September 2003, and reiterated in a later internal email dated 9 March 2004 at B382) that the purchase contract in the present case was “effectively an option rather than a conditional contract” because Mr Stoll “had to be happy with the terms of the planning permission when it was granted”. In her attendance note of 14 February 2003 (B216) Ms Sands had “clarified” Mr Stoll’s instructions to Mr Harris in terms of the transaction being “not an option to purchase” but rather “an agreement subject to planning permission”. In her reporting letter dated 18 February 2003 (B230-2) Ms Sands accurately described the purchase as “conditional” on Mr Stoll obtaining planning permission that was acceptable to him “acting reasonably”. In her telephone attendance at about 4pm on 17 February (B221-2) Ms Sands had explained (in terms which commended themselves to Mr Harris) what was meant by the purchaser “acting reasonably” in this context. If Mr Harris perceived the contract to be the equivalent of an option, then in my judgment he was mistaken; and if this misconception informed Mr Harris’s omission to seek to introduce a “call-in” clause into the contract, then in my judgment he fell into error. (I note, in passing, that in an internal email of 5 March 2004, at B382-3, Mr Martin Caller, Mr Stoll’s initial point of contact with the defendant firm and one of its lead partners, recorded that Mr Stoll had thought that he had signed a conditional contract, and claimed that he did not realise that he had signed an option; and also Mr Stoll’s contention that the option period was too short to allow for the contingency of a judicial review. Mr Caller also recorded Mr Harris’s view that if the contract had been one conditional only upon planning, rather than an option, then there would have been a clause to cover the contingency of a judicial review. Mr Caller recorded that he, personally, could not see the difference, postulating that one would surely need to cover the same contingency whether there was an option or a conditional contract.)[15]In my judgment, the proper discharge by Mr Harris of the duties he owed to his client, as the prospective purchaser of a property subject to a condition of the grant of planning permission acceptable to the purchaser “acting reasonably”, dictated that he should not have refrained from amending the draft contract, by seeking to introduce a “call-in” clause, without the informed consent of Mr Stoll, as his client, to such a course. In failing to propose such an amendment without having raised and discussed the matter with Mr Stoll, in my judgment Mr Harris breached the duties he owed to his client. Had the matter been raised when Mr Harris was amending the contract between 27 and 31 January 2003, there would have been sufficient time for the parties’ solicitors properly to have addressed the issue with their respective clients long before exchange of contracts took place on 24 February 2003. Had this been done, there would probably have been no need to revisit the matter in the light of the disclosure of the dispute over the shared access with Mr and Mrs Krebs referred to in Ms Sands’s reporting letter of 18 February 2003 (at B231), which was peremptorily dismissed as an issue by Mr Stoll during the course of the telephone conversation recorded in Ms Sands’s attendance note of 18 February 2003 at 4.45pm (B231) and at the pre-exchange meeting between Mr Stoll, Mr Atkins, Mr Harris and Ms Sands at 1.20pm on 24 February 2003 (at B272).

Causation

[16]I turn then to the issue of causation. There is no dispute as to the relevant law. The leading authority is the case of Allied Maples Group Ltd v Simmons & Simmons [1995] 1WLR 1602, a decision of the Court of Appeal. If the question is what the claimants themselves would have done, they must prove on the balance of probabilities that they would have acted differently. If, however, the question is what some third party would have done in the hypothetical scenario following competent advice and action from the defendant solicitors, then damages are assessed on the basis of the loss of a chance; and this involves the claimants in showing that there was a real or substantial, rather than a speculative, chance that the third party would have acted so as to confer the relevant benefit upon, or avoid the relevant risk to, the claimants.[17]Had Mr Harris given appropriate advice to Mr Stoll before amending the draft contract, I am persuaded, on the balance of probabilities, that Mr Stoll would have instructed Mr Harris to seek to insert a “call-in” clause in the draft contract: however minimal the risk of a third party application for judicial review to challenge any grant of planning permission might have been perceived to be, there would have been no countervailing detriment to Mr Stoll in seeking to protect himself, at that early stage in the history of the conveyancing process, against any such risk. However, on the evidence adduced at trial, the claimants have not satisfied me that there was a real or substantial chance that Mr Simon would have agreed to any “call-in” clause. On the evidence, in my judgment the prospects of him doing so are entirely speculative.[18]One difficulty that presents itself is that Mr Ferris never identified with precision the terms of the “call-in” clause for which he was contending on behalf of the claimants. It was clear from Mr Harris’s evidence (at T3/31, 44 and 73-4) that he appreciated that if the proposed purchase contract was properly to address the risks of any third party challenge to a grant of planning permission, the existing long stop date of six months would have to be extended by at least three months and seven days to allow time for the issue and service (see CPR 54.5 and 54.7) of any application for judicial review; and, if such an application were to be made, for such further period as might be necessary to enable any such application to be finally determined by the Administrative Court. Had Mr Harris properly discharged his duties to the claimants, he would have advised Mr Stoll of this, Mr Stoll would have taken it on board, and it would have been factored into the formulation of any “call-in” clause propounded by Mr Harris. Thus, any proposed “call-in” clause would have necessitated an extension to the long-stop date of at least 3 months and 7 days, and, if a judicial review were to be initiated within that period, considerably longer. As previously indicated, Mr Stoll had no idea how Mr Simon would have responded to any amendment of the draft contract along these lines. Absent any evidence on this point from Mr Simon, from his solicitor, or from his estate agent, in my judgment Mr Simon’s reaction to such a provision is entirely a matter of speculation. I reject Mr Ferris’s submission that (from the seller’s point of view) the inclusion of a “call-in” clause was “merely a logical gloss on the planning condition”, and its acceptance a “no-brainer”. I do so because it involved an extension of the long-stop period by a factor of at least 50%. The background circumstances lead me to conclude that the claimants have failed to establish that there was any real or substantial chance that Mr Simon, who was in receipt of advice from respectable and apparently competent London solicitors, would have agreed to the inclusion of such a clause in the draft contract.[19]My reasons for this conclusion are as follows: First, the only witness who ventured any opinion on the subject was Mr Harris. He was firmly of the belief that the vendor would not have accepted any extension to the long-stop date beyond the existing six months. At paragraph 24 of his witness statement, Mr Harris had said that he did not attempt to extend the six-months’ long-stop date for completing the purchase as he understood, either from speaking with Mr Stoll or with Mr Cohen of Fladgate Fielder or, in fact, with both of them, that Mr Simon would not be prepared to negotiate on the point, and Mr Stoll was happy to accept that. In answer to questions from the bench at the end of his evidence (at T3/74) Mr Harris said that he recalled a conversation when he was effectively informed that six months meant just that, presumably by Mr Cohen. This recollection was tested in further cross-examination by Mr Ferris (at T3/74-7). From the contemporaneous documents, there would not appear to have been any occasion, or reason, for Mr Harris to have raised the question of the vendor’s commitment to a six-months’ long-stop date with Mr Cohen; and, in the absence of any contemporaneous record of such a conversation, I am not prepared to find that it took place. I am entirely satisfied that Mr Harris was not deliberately lying about this conversation: rather, I think that - perhaps understandably after a lapse of six years - Mr Harris was misrecollecting something that he had been told about the vendor’s attitude by Mr Stoll. I think it likely that Mr Stoll had told Mr Harris that the seller would not accept a long stop date in excess of six months. During the course of her telephone conversation with Mr Stoll at 4pm on 17 February 2003 (recorded at B221-2), Ms Sands had asked Mr Stoll whether he would like her to approach the seller's solicitor to extend the period in the agreement to perhaps 10 or 12 months, but Mr Stoll had said that this would not be necessary. Mr Stoll also indicated that, whilst he was happy with the agreement stipulating a long-stop period of six months, he planned to talk to the seller about the possibility of verbally agreeing to extend this by a couple of months, if necessary to obtain the planning permission. There was no evidence from Mr Stoll as to how the parties had arrived at the long-stop date of six months, but (since it appeared in the draft contract submitted by Fladgate Fielder for the seller) it had apparently been agreed in principle before Mr Stoll instructed the defendants. Since Mr Stoll would have wanted the maximum flexibility, the inference is that six months was the maximum period that Mr Simon was prepared to allow the contract to remain on foot. I note that when, according to Mr Stoll, Mr Simon agreed to the claimants re-submitting a revised planning application after the initial refusal, there was no re-negotiation of the agreed six months’ long-stop date. The inference is that Mr Stoll appreciated that the seller would not contractually commit himself to a long-stop date in excess of six months, and was content to accept this. I recognise, however, that this was never put to the test in the context of any attempt to amend the draft contract by introducing a “call-in” clause. In these circumstances, Mr Harris's perception that the seller would not have accepted any extension to the long-stop date beyond the existing six months must carry minimal weight. On the other hand, neither Mr Stoll, nor any other witness, ventured any opinion, or expressed any perception, to the contrary.[20]Secondly, and more pertinently, I can see no reason whatsoever why Mr Simon’s solicitors should have advised him to agree to any “call-in” clause, or why he should have had any reason, or incentive, to do so. Mr Simon had purchased the property less than a year earlier for £307,000. Although subject to a legal charge, the chargees were the trustees of the Paul Simon Life Interest Trust: see B470-2; and there was no evidence that Mr Simon was in any pressing need to realise his investment in the property. The evidence from Mr Alex, the contents of the mortgage valuation report prepared for HSBC Bank plc on 18th March 2003, and the evidence of the joint expert valuer, are all to the effect that the agreed sale price of £400,000 (which, according to Mr Alex, whose evidence I accept in preference to that of Mr Stoll, at T1/15 and T2/33, that it was Mr Simon who set the price at £400,000, was less than the asking price) represented a realistic sale price for the property in its existing condition, and without the benefit of planning consent for redevelopment. It is also clear on the evidence, and I find, that the market was, and was perceived to be, buoyant, and rising; and it could reasonably be anticipated that the property (which had risen in value by almost a third in the year since its purchase) would continue to increase in value at a similar rate. In these circumstances, I can see no reason why Mr Simon should have been prepared to commit himself for more than six months to a fixed-price contract, conditional on the grant of planning permission, particularly when the deposit payable under the contract was the nominal sum of £1. The effect would be that, without assuming any risk whatsoever (beyond the costs associated with making the planning application, which, in the event, had been incurred, to the extent, at least, of the initial application, even before exchange of contracts), provided planning permission was granted the claimants would obtain the benefit of the increase in the value of the property attributable both to that planning permission, and also to the rise in residential property values generally. Had Mr Simon been asked for his agreement to an extension of the long-stop date beyond the agreed period of six months, it seems to me that the overwhelming likelihood is that he would have said to the claimants:
“Six months is what we agreed. Take it or leave it. If you want to apply for planning permission, go ahead. But I shall continue to market the property in the meantime. The market is buoyant and is still rising. If I receive an offer in excess of £400,000 – which is, in any event, less than my current asking price – you will have to beat it or you will lose the property.”
It does not seem to me to be realistic for the claimants to reason from the fact that Mr Simon had agreed to commit himself, by way of a conditional contract for a maximum period of six months, that he would have been prepared to do so for a further period of at least another 3 months and 7 days, and for such additional period as might have been required in order to enable any third party challenge by way of judicial review to be finally determined, without adducing any evidence whatsoever to explain why Mr Simon (1) should have stipulated a six months’ long-stop date in the first place and (2) should commit himself to any further restraint upon his ability to dispose of his property in a rising market. After all, there is no evidence that the claimants were the only persons in the market for the property. Whilst I recognise that the burden of proving the loss of a chance does not require the claimants to prove their case on the balance of probabilities, it is necessary, nevertheless, for the claimants to discharge the burden of proving a real or substantial chance of achieving the necessary result on the part of the third party. In my judgment, this burden is not discharged by pointing to a chance that is no more than purely speculative.[21]Had the claimants persuaded me that there was a real or substantial chance that Mr Simon would have been prepared to concede a “call-in” clause, then I consider it likely that he would have insisted upon some matching concessions from the purchasers by way of a quid pro quo. It is likely that he would have refused to agree to the deletion of clause 16.7 from the draft contract, which had required the purchasers to meet the outgoings for the property as from the date of exchange: see Fladgate Fielder’s letter of 6 February 2003 at B205 and clause 16.7 of the original draft contract at B541. It is also likely that Mr Simon would have insisted on the payment of a conventional deposit, of between 5 and 10% of the purchase price, perhaps with the inclusion of a further provision permitting this sum to be irrevocably released to the vendor upon the grant of planning permission in terms acceptable to the purchaser, acting reasonably. (In this connection, I note Mr Stoll’s response to my question, at T2/34, indicating his reluctance to pay any money at all to Mr Simon in advance of an effective planning permission.) But all of this is speculation in the absence of any material evidence from the vendor, his solicitor or his estate agent.[22]On the footing that the seller would have rejected any proposal for a “call-in” clause, I find that the claimants have failed to satisfy me, on the balance of probabilities, that they would have declined to proceed any further with their purchase of the property. In my judgment, the likelihood is that they would have assumed the risk of any third party challenge to the grant of planning permission, and would have proceeded to an exchange of contracts on the basis of a contract in the terms of that which was actually exchanged on 24th February 2003. The risk of any third party challenge - still less of a successful challenge - to any grant of planning permission made pursuant to the claimants’ application would have been perceived as being so remote as not to be of any real concern to Mr Stoll. On that basis, I find that the defendants’ breach of duty was not causative of any loss on the part of the claimants.[23]I reject the self-serving evidence of Mr Stoll and Mr Atkins that they would not have proceeded to an exchange of contracts except on terms that they could not be obliged to complete unless and until planning permission was not only in place, but was also incapable of further challenge. (In this connection, I note that, when pressed in cross-examination at T1/64-5, Mr Stoll indicated that he could not tell the court what he would have done in the hypothetical situation that he had received advice from Mr Harris that a provision that would have made the planning permission “absolutely bomb-proof” might have required a delay in completion of up to two years.) I prefer the evidence of Mr Harris that he was confident that Mr Stoll would have gone ahead anyway; and I have no doubt that Mr Atkins would have followed his lead. The reason for this is that Mr Stoll would have perceived there to be no real risk in proceeding to completion once planning consent had been granted, even if he had been alerted to the risk of that permission being challenged by way of a third party application for judicial review. In this connection, I refer to the views expressed at Mr Stoll’s meeting with Mr Gower-Jones on 4 August, as recorded in the attendance note at B277 and paragraph 10 of Mr Gower-Jones’s witness statement (whilst not forgetting that these have to be considered against the background of a purchase contract which contained no “call-in” clause). Even after he had witnessed Mrs Krebs’s anger at the meeting at which planning consent was granted, Mr Stoll had thought that “as time went by hopefully she would accept the situation” (T1/56). I have no doubt that Mr Stoll would have accepted the advice that I infer (in the absence of any direct evidence adduced by the claimants) that he would have received from his architect that the planners at Bury MBC could be trusted to follow all of the appropriate statutory procedures; and the advice that he would have received from the defendants that it would be unusual, in the context of a planning permission for residential development, for any third party challenge to be made, and even more unusual for it to succeed. In this connection, I also bear in mind the confidence as to the likely outcome of the challenge that was entertained, both by Bury BC (as referred to in the defendants’ fax of 20 November 2003 at D1113) and by the claimants, until the hearing of the oral application for permission to apply for judicial review before Collins J on 6 February 2004, and also Mr Stoll’s surprise at the actual outcome (as stated at T1/58-60). I also bear in mind that the reason for quashing the actual planning consent (as recorded in the statement of reasons at A195D-F) post-dated, and could not reasonably have been anticipated at the time of, exchange of contracts, namely the planning authority’s failure, at the time it granted planning permission on 30 July 2003, to take into account the earlier refusal of the claimants’ original application for planning consent on 13 March 2003.[24]In any event, I reject the evidence that Mr Stoll was adverse to all risk because it is inconsistent with other reliable evidence in the case. Mr Stoll’s willingness to accept some element of risk is demonstrated by the facts that(1) he applied for planning permission even before the vendor was contractually committed to the sale of the property by an exchange of contracts;(2) he was entirely unconcerned by the disclosure of the somewhat acrimonious dispute over access with the neighbouring householders, Mr and Mrs Kreb (see the relevant extracts from the reporting letter at B231 and the file notes at B234 and B272); and(3) he exchanged contracts without having obtained any contemporaneous expert valuation of the property, and thus without either (a) any expert third party confirmation of the reasonableness of the purchase price, of the value of the property with planning permission, or the viability of the claimants’ development proposals, or (b) any assurance that the required bank finance would be in place to enable the claimants to complete their purchase of the property in accordance with their obligations to the seller.

Quantum

[25]In the light of my decision on causation, I can deal with issues of quantum quite shortly since it is not strictly necessary to resolve them for the purposes either of my decision or (since transcripts of the oral evidence have already been obtained and, in any event, the matters in dispute largely fall to be resolved by reference to the documents) of any future appeal.[26]In the circumstances in which the claimants found themselves in August 2003, and on the basis of Mr Gower-Jones’s advice, I do not consider(1) that Mr Stoll can be criticised for not having alerted Mr Gower-Jones at that time to the fact of the first planning refusal or(2) that the claimants can be criticised for completing their purchase of the property.[27]Had it been necessary to do so, I would have rejected the defendants’ challenge to the claimants’ ability to recover in respect of interest and outgoings for the whole of the period up to completion of the actual sale of the property. In my judgment, the defendants’ complaint that the sale was delayed because of the claimants’ desire to make a profit by offering the property for sale at unrealistically high prices for far too long a period raises issues of mitigation rather than going to causation of loss and damage. Failure to mitigate has not been pleaded by way of defence; and rightly so, for the defendants cannot discharge the burden that would lie upon them of proving such a failure. At all times, the claimants acted in accordance with the advice of reputable and apparently competent estate agents in a dilemma which (on the hypothesis that liability had been established) was of the defendants’ own creation. In any event, even if a failure to mitigate had been demonstrated, on the evidence of the joint expert, it only operated to delay the sale by some 3 months (from January to April 2005: see A156C). In my judgment, it would have been wholly unrealistic, in the then prevailing market conditions, to have expected the claimants to have placed the property on the market in February 2004 at a price of only £430,000. To have done so would have exposed them to the allegation that this itself represented a failure to mitigate their loss. Nor was it a course ever suggested by the defendants, who continued to act for the claimants at that time.[28]I accept (as, with the benefit of hindsight, did Mr Stoll at T1/81) that there was no benefit to the claimants in withdrawing the planning application in June 2004, and that this should have been allowed to run its course. I am satisfied, on the evidence, that it was withdrawn as a result of the offer to purchase from Mr and Mrs Salisbury, at a price of £480,000, which, in the event, came to nothing. Again, it seems to me that this goes to mitigation rather than to causation of loss and damage. The outcome of this planning application, had it proceeded to a final determination, is entirely a matter of speculation. The defendants have not proved that this failure to mitigate contributed to the claimants’ loss and damage.[29]I am not impressed by, and I reject, the defendants’ argument that recovery in respect of the shortfall on the bank’s mortgage advance should be disallowed because the corporate defendant, and principal borrower, is without assets, and there is no sufficient evidence that the bank will ever call upon the individual defendants to honour their secondary liability as guarantors. I can well understand that the bank is awaiting the outcome of the present litigation before pressing Mr Stoll, in particular, for the recovery of the outstanding liability. Whether, had liability in damages on the part of the defendants been established, I would have imposed any terms upon the payment of any award of damages under this head does not, in the event, fall for decision.[30]Had it been necessary to do so, I would have rejected the claimants’ submission that I should permit them to recover in respect of outgoings and expenditure incurred on their behalf in relation to the property by Mr Atkins’s company, A and A Building Services Limited. There is no evidence that any significant elements of this expenditure were ever reimbursed to that company by any of the claimants personally. The company itself is in insolvent liquidation. Although such expenditure may have been reflected in Mr Atkins’s loan account with the company, there is no sufficient evidence that this would ever have been repaid to him; and, so far as any of the claimants are concerned, any loss under this head is purely a paper loss.

Conclusion

[31]In the result, and for the reasons given, breach of duty is established; but the claim fails for want of sufficient proof of causation. Any damages for breach of contract are purely nominal. Disposal (not forming part of the court’s judgment): Judgment for the claimants for nominal damages in the sum of £1. Claimants to pay the defendants’ agreed costs of the claim of £135,000, payable by instalments.