Morkot & Ors v Watson & Brown Solicitors & Anor [2014] EWHC 3439 (QB)

Case No 3LS40576

[2014] EWHC 3439 (QB)

IN THE HIGH COURT OF JUSTICE

QUEEN’S BENCH DIVISION

Venue LEEDS DISTRICT REGISTRY

MERCANTILE LIST

The Court House

Oxford Row

Venue Leeds LS1 3BG

Date 24 October 2014

Before

His Honour Judge Behrens sitting as a Judge of the High Court in Leeds

Between

(1) GORDON ROGER MORKOT AND IRENE MORKOTClaimants

(2) KEITH RONALD BELLEW AND ANGELA LESLIE KNIGHTClaimant

(1) WATSON & BROWN SolicitorsDefendants

(2) THE TRUSTEE IN BANKRUPTCY OF KARON BROWNDefendant

Geoffrey Knowles (instructed by RobinsonMurphy Solicitors) for Claimants

for The Defendants did not appear and were not represented

Hearing Hearing dates: 2 and 3 October 2014

Judgment

Judge Behrens :

[1]Introduction This is an assessment of damages /loss in two separate claims made by the Claimants against their former solicitors, Watson & Brown.

[2]The claims arise out of purchases of property by the Claimants in 2006 from Morris Properties Group Ltd (“Morris Properties”) In fact some other Companies controlled by Simon Morris are involved in some of the transactions. Nothing turns on this for the purpose of this judgment. The properties were purchased for the purpose of letting. The Claimants did not have the purchase price and thus needed to borrow from various lenders.

[3]The properties were part of a portfolio of properties marketed by Morris Properties to investors often by way of advertisements in the press. Typically they were marketed on the basis that investors would be able to obtain a 100% mortgage and then be able to let the property. It is said that the price of each of the properties was significantly above its then market value.

[4]Morris Properties offered a “gifted deposit/seller’s cash back scheme” which represented the deposit necessary to obtain a mortgage.

[5]Watson & Brown is a firm of solicitors practising from South Shields. As is now clear Karon Brown was the sole principal of Watson & Brown. In each of the transactions Karon Brown was acting for the purchaser and the lender. She also received the referrals from Morris Properties.

[6]In each of the cases with which I am concerned the principal allegation against Watson & Brown is that Karon Brown did not disclose to the lender that the deposit was in fact being provided by the vendor as part of the gifted deposit scheme. Equally she did not disclose to the purchasers that she had failed to disclose the existence of the gifted deposit to the lenders. If the lenders had known about the gifted deposit scheme they would not have gone ahead with the loans. In the result the purchasers would not have gone ahead with purchases.

[7]As a result of these (and other) transactions involving the Morris Group of Companies disciplinary proceedings were commenced against Karon Brown. She did not attend the hearing on 25th October 2010. Four serious allegations were found proved including an allegation that she preferred the interests of Simon Morris to that of her clients and that she acted deliberately so that her conduct was dishonest within the test derived from Twinsectra v Yardley

[2002] UKHL 12

. She was struck off the Roll of Solicitors.

[8]A number of purchasers have instituted proceedings against Watson & Brown. A detailed Particulars of Claim has been prepared in each case. Karon Brown is bankrupt. Neither she nor her trustee in bankruptcy has taken any active steps in the proceedings. No defence has been filed and judgment on liability has been obtained in default of defence. On 20th June 2014 directions were given for the assessment of damages. I ordered that three cases stand as test cases and all other claims be stayed pending the quantification in the test cases.

[9]The first test case (Mr and Mrs Edwards) was relatively straightforward in that the transaction did not eventually proceed. However Mr and Mrs Edwards had paid a total of £10,678.75 between 11 April 2006 and 18 August 2006. I was satisfied that those monies would not have been paid if they had received proper advice from Watson & Brown. Accordingly it was relatively straightforward to assess the damages/loss in the sum of £10,678.75. In addition I awarded interest at 4%. It was accordingly not necessary to reserve judgment.

[10]The other two test cases are more complex because in both cases the transactions proceeded to completion. In one case (Mr and Mrs Morkot) the lender repossessed under the terms of the mortgage and (fortunately for Mr and Mrs Morkot) has waived any claim for the shortfall. There is accordingly modest and is limited to the amount they have lost in the transaction. In the other case Mr Bellew and Mrs Knight completed on two properties and have continued to pay the mortgage instalments and to receive rents. Their losses are said to be substantial because the rents they have received do not cover the mortgage instalments and other expenses involved in the letting. Furthermore the properties were overpriced and the value has fallen further as a result of the falls in the property market. The legal issues involved in these two claims were such that I felt it necessary to reserve judgment.

[11]It remains to be seen whether any of the Claimants will recover the fruits of any judgment. Karon Brown is bankrupt and it appears unlikely that much will be recovered by way of dividend by the unsecured creditors. Watson & Brown’s professional indemnity insurers have refused to indemnify the firm because of the dishonesty. Thus the only hope of recovery may lie in a claim to the Solicitors Compensation Fund.

[2]The facts of the individual cases

[12]Before discussing the relevant legal questions it is necessary to set out the facts of the individual cases in more detail. 2.1 Mr and Mrs Morkot – 85 Burley Lodge Terrace, Leeds LS6 1QD (“85 Burley Lodge”) The Transaction

[13]Mr and Mrs Morkot attended a sales presentation by Morris Properties on 20 February 2006. They agreed to purchase 85 Burley Lodge, which, at that time, was being marketed at £269,995.

[14]They were told that all matters relating to the property transaction would be dealt with by Morris Properties. All they needed to do was to provide a reservation fee of £2,000. They paid the reservation fee the same day.

[15]The documents are not easy to follow. However Watson & Brown opened their file on 22 February 2006. Their file contains a quotation of legal fees totalling £9,929.38 the majority of which (£8,099.85) relates to Stamp Duty.

[16]It was initially proposed that there would be a loan of £240,245 funded by GMAC. On 18 May 2006 Connells provided the proposed lender with a valuation valuing the property at £250,000. [It is to be noted that the only comparables relied on were 3 other properties sold or under offer by Morris Properties.] In any event the mortgage valuation report was not shown to Mr and Mrs Morkot.

[17]In the result on 7 June 2006 GMAC made a mortgage offer of only £222,945. On 12 June 2006 the vendor reduced the price to £249,995.

[18]The transaction completed on or about 20 June 2006.

[19]There are 2 completion statements on Watson & Brown’s file. One is prepared by Watson & Brown and the other by Morris Properties.

[20]Watson & Brown’s completion statement confirms the purchase price at £249,995. It contains 2 additions – a figure of £4,106.13 in respect of fees and £500 in respect of a broker’s fee. Thus the total cost is said to be £254,601. This is paid for by a loan of £222,460, a deposit “paid to Morris Properties” direct of £27,499 a reservation fee of £2,000 and a balance due from Mr and Mrs Morkot of £2,642.13. There is no documentary evidence but when he gave evidence Mr Morkot confirmed that he paid the £2,642.13.

[21]There is in fact a complication in this case because the vendor was an associated company of Morris Properties (First City Rentals Ltd) who instructed their own solicitors. However I do not think that this affects the position that in effect Morris Properties were providing a gifted deposit of 11% of the purchase price.

[22]The completion statement from Morris Properties is more difficult to follow. It also records the price at £249,995. It records the reservation fee of £2,000. It also refers to a customer deposit of £27,499. It refers Customer Stamp Duty of £2,499.95 said to be paid direct to Morris Properties leaving a balance of £220,495.55 to complete.

[23]It is thus to be noted that both completion statements refer to the deposit of £27,449 paid direct to Morris Properties. In reality as everyone knew this sum was not paid.

[24]Following completion Mr and Mrs Morkot attempted to let out 85 Burley Lodge. The documents supplied by them indicate that they received rents of £13,004 but their expenses including mortgage payments insurance repairs, letting agent’s fees and sundry expenses totalled £14,052.34. Thus they allege that they made a loss of £1,048.11.

[25]In July 2007 they surrendered possession to GMAC. 85 Burley Lodge was sold in September 2008 for £135,400 leaving a shortfall to GMAC of a sum in excess of £110,000. However GMAC have written off the shortfall so that the losses relate solely to the amounts they have paid out and the loss in the lettings. The allegations

[26]The allegations of breach of duty are set out in paragraph 41 of the Particulars of Claim. There are 32 separate allegations. They include: 1. concealing from Mr and Mrs Morkot the effect and significance of the gifted deposit 2. acting for both Mr and Mrs Morkot and GMAC when a conflict of interest existed. 3. preferring the interests of Morris Properties over those of both Mr and Mrs Morkot and GMAC 4. failing to advise Mr and Mrs Morkot that if GMAC had been informed of the gifted deposit it would not have offered a mortgage to Mr and Mrs Morkot.

[27]It is to be noted that there is no pleaded allegation of dishonesty or fraud although it is plainly to be inferred from the pleading that it is alleged Watson & Brown were aware of the gifted deposit scheme.

[28]It is alleged (in paragraph 35 of the Particulars of Claim) that the true market value of the property was significantly less than the Connell valuation and (in paragraph 36) that Mr and Mrs Morkot had no way of financing the mortgage interest payments other than through the rentals. They were forced to hand over the property because the receipts were insufficient.

[29]In paragraphs 43 and 44 it is alleged that if proper advice had been given the transaction would not have proceeded. This is either because Watson & Brown would have advised Mr and Mrs Morkot not to proceed or because GMAC would either have not offered mortgage terms to them or would have offered to lend a lesser sum which would not have been sufficient for them to proceed. 2.2 Mr Bellew and Mrs Knight – 34 Dennison Court, Hartley Road, Nottingham NG7 3PH (“Flat 34”) The transaction

[30]Mr Bellew and Mrs Knight decided to invest in buy to let properties to provide some security for the future. They were introduced to Morris Properties through an agent known as Fast Track. The attraction was that it were offered a “one stop shop” and indicated that it organised brokers to arrange the mortgage, would direct us to their panel solicitor and would arrange for tenants. They were also advised that as an incentive the developer would offer a gifted deposit of 15% of the purchase price.

[31]They decided to purchase Flat 34 on about 3rd February 2006. On or about that date they signed and completed a purchase questionnaire which sets out the price (£249,995), that an 85% mortgage was required, that a 15% discount was to be provided by Morris Properties, and that a Reservation Fee of £2,000 had been paid to the agent.

[32]Watson & Brown’s ledger shows a credit from Mr Bellew on 9th February 2006 but no other direct payments from Mr Bellew and Mrs Knight. The only other documents relating to the sale comprise a completion statement from Morris Properties, a completion statement from Watson & Brown and an invoice setting out the basis of Watson & Brown’s charges. There are thus no documents relating to the mortgage application, the certificate of title and the like.

[33]The completion statement from Morris Properties shows a balance of £211,768.63 to complete. It records the receipt of the £2,000 reservation fee and also the direct payment (“gifted deposit”) of £37,499.45 to the developer. It contains what must be a typographical error because the reservation fee is said at one point to be only £1,000 but it has been correctly deducted at £2,000.

[34]The Watson & Brown completion statement starts with the £211,768.63 referred to in Morris Properties’ completion statement. It adds Watson & Brown’s costs of £4,044.01 and a broker’s fee of £500. It records an advance of £212,465 from Bank of Scotland (“BOS”) leaving a balance to complete of £3,847.64

[35]There is no documentary evidence that Mr Bellew and Mrs Knight ever paid this £3,847.64. There is an entry in the Watson & Brown ledger dated 5th April 2006 which records a credit of £3,847.64 but in the narrative the payer is described as Morris Properties. When he gave evidence Mr Bellew said he had paid the £3,874.64 to Morris Properties. He undertook to see if he could find any evidence of this payment. The losses

[36]There are a number of heads of loss. As already noted Mr Bellew and Mrs Knight have retained Flat 34 but contend that they would not have proceeded at all if there had been no breach of duty. Costs involved with the transaction

[37]As set out in the Schedule of Loss only 3 items are claimed – a finder’s fee of £6,065.03, the reservation fee of £2,000 and legal fees of purchase. Value of the property

[38]I have been provided with 2 valuations of Flat 34 by Mr Brailsford at John Brailsford Ltd. The first is dated 28th June 2012. Mr Brailsford’s view was that the value of Flat 34 at 2006 £160,000. By 2012 the value had fallen to £100,000. In his second valuation dated 25th July 2014 he thought that the property was now worth £115,000. Trading Losses

[39]As already noted Mr Bellew and Mrs Knight have kept Flat 34 and are letting it out. They have an interest only mortgage. The amount currently due is roughly the same amount as was lent. (As at 31st March 2011 it was £219,173.) I was told at the hearing that that is the approximate figure now due.

[40]Mr Bellew and Mrs Knight have received rent of £44,797.96 but have expenditure of £98,213.91. Included within the expenditure are mortgage payments of £42,237.98, taxes, insurance, letting agents fees of £10,421.81, and sundry expenditure of £2,627.89. The sundry expenditure includes a sum of £920 said to be a valuation fee, £88 for an engrossment fee, a sum of £500 said to be a broker fee and sums for internet and TV. Allegations

[41]The allegations of breach in both of the claims are for all practical purposes the same as those pleaded in Mr and Mrs Morkot’s case and I shall not repeat them. 2.3 Mr Bellew and Mrs Knight – Flat 7, Clarendon Court, Leeds LS3 1BT (“Flat 7”) The transaction

[42]There are similarities between this transaction and that relating to Flat 34. Mr Bellew and Mrs Knight decided to purchase Flat 7 in early April 2006. The price was £249,999.15. They signed the purchase questionnaire which recorded the price, the reservation fee (£2,000), the discount (£34,499.15) and the loan required (£212,499.15).

[43]Watson & Brown opened their file on 5th April 2006. On 9th April 2006 Mr Bellew wrote to Watson & Brown setting out details of the transaction (including the builder’s discount of £34,499.15) and enclosing a cheque for £1,000. The £1,000 was credited to Watson & Brown’s client account on 12th April 2006.

[44]The only other documents on the file are two other completion statements both of which appear to have been prepared by Morris Properties. The first completion statement shows the price to have been reduced to £238,000 and the payment to the developer to have been increased to £35,700. There is no explanation as to why these two items changed but it may have been connected with the amount of loan available. After additions of £1,232.05 and taking into account the reservation fee of £2,000 it recorded that the amount needed to complete was £201,532.05.

[45]The second completion statement started with the figure of £201,532.05. As originally printed it included additions amounting to £6,422.01 as it asserted that the reservation fee was outstanding. This was subsequently corrected in manuscript. The additions which remained comprised solicitors’ fees (£1,542.01), Stamp Duty (£2,380) and a Broker Fee (£500). The mortgage advance from Mortgage Express amounted to £202,300. After giving credit for the £1,000 already paid to Watson & Brown, the completion statement showed a balance to complete of £2,654.06.

[46]It is plain that Mr Bellew paid this sum direct to Morris Properties over the telephone on 11th May 2006 because attached to the completion statement is a copy of the receipt. The losses

[47]There are a number of heads of loss. As already noted Mr Bellew and Mrs Knight have retained Flat 7 but contend that they would not have proceeded at all if there had been no breach of duty. Costs involved with the transaction

[48]As set out in the Schedule of Loss 4 items are claimed – a finder’s fee of £89.08, the reservation fee of £2,000, the amount paid on completion of £2,654.06 and the stamp duty of £2,380 Value of the property

[49]I have been provided with 2 valuations of Flat 7 by Mr Collinson at Adair Paxton. The first is dated 30th August 2012. Mr Collinson’s view was that the value of Flat 7 at 2006 was a maximum of £175,000. He took the view that a realistic rental would have been £60 per week per room and that it was appropriate to take a yield of 7.5%. By 2012 the value had fallen to £115,000. In his second valuation dated 11th August 2014 he thought that the property was now worth £125,000. Trading Losses

[50]As already noted Mr Bellew and Mrs Knight have kept Flat 7 and are letting it out. They have an interest only mortgage. The amount currently due is roughly the same amount as was lent. (As at 31st March 2013 it was £205,359.) I was told at the hearing that that is the approximate figure now due.

[51]Mr Bellew and Mrs Knight have received rent of £35,289.64 but have expenditure of £85,750.75. Included within the expenditure are mortgage payments of £52,267.78, taxes, insurance, letting agents fees of £6,164.89, £920 for a valuation fee and sundry expenditure of £780. The sundry expenditure includes a sum of £920 said to be a valuation fee, £117.51 for an engrossment fee, a sum of £500 said to be a broker fee.

[3]Legal principles 3.1 Breach of Duty

[52]In the light of the failure by the Defendants to file a defence it is not necessary for me to analyse the breaches of duty in any detail. A number of points, however, must be made.

[53]It is well established that allegations of fraud and dishonesty must be specifically and clearly pleaded. There are no such allegations in the pleadings. In those circumstances and notwithstanding the findings of the Solicitors Disciplinary Tribunal it would be wrong for me to treat this as a case of fraud.

[54]The leading authority on claims for breach of fiduciary duty is Bristol & West Building Society v Mothew

[1998] Ch 1

. In that case Millett LJ analysed the fiduciary obligations owed to clients into 4 categories. First the “double employment” rule prevented a solicitor acting for 2 clients whose interest may conflict, without obtaining informed consent. This is implied in a case where the solicitor acts for lender and borrower. Secondly there was a duty of good faith. There had to be an intention to further the interests of one client to the prejudice of the other though the conduct would not have to be dishonest. Third the fiduciary must not be inhibited from carrying out his duties to the other. Breach of this obligation also required intentional conduct. Fourth a solicitor should not be in a position where he cannot fulfil his obligation to one client without failing the other.

[55]I agree that breaches of fiduciary duty are established. I agree that there was an actual conflict of interest in relation to the gifted deposit. I agree that Watson & Brown knew about the gifted deposit. I agree that Watson & Brown intentionally preferred the interests of Morris Properties because of the substantial fees to be earned from them.

[56]By 2006 a gifted deposit was a well established badge of a mortgage fraud. In those circumstances I also agree that Watson & Brown were under a duty to disclose the gifted deposit to the lender and to advise the purchasers that it was unlikely that they would be made a mortgage offer. 3.2 Damages Contract and Tort

[57]This is a well traversed area. In view of the fact that I heard no submissions from the Defendants it would be inappropriate for there to be any lengthy discussion of the principles in this judgment.

[58]I was referred to the decision of the House of Lords in South Australia Asset Management Corp v York Montague Ltd

[1997] AC 191

(“SAAMCO”). There is an extensive discussion of the effect of SAAMCO in the decision of Chadwick J in Bristol & West v Fancy & Jackson [1997] 4 AER 97. Chadwick J was dealing with a number of different claims by lenders against their solicitors in mortgage transactions where there had been a variety of defaults by the solicitors. He had to consider claims for breach of the common law duty of care and of fiduciary duty.

[59]At p 620 of the judgment Chadwick J set out the test to be applied from the judgment of Lord Hoffmann in SAAMCO:

'It [the principle] is that a person under a duty to take reasonable care to provide information on which someone else will decide upon a course of action is, if negligent, not generally regarded as responsible for all the consequences of that course of action. He is responsible only for the consequences of the information being wrong.'

[60]He went on to explain the test in the following way: It is important to keep in mind that in each of the three appeals considered in the SAAMCO judgment the lender would not have lent if he had received proper advice as to the true value of the property (see

[1996] 3 All ER 365

at 368,

[1997] AC 191

at 210). So, on the facts to which Lord Hoffmann was addressing his judgment, the plaintiff lender had suffered loss which he would not have suffered but for the negligent valuation. The Court of Appeal had held that, in such a case, the lender was entitled to recover the difference between the sum which he lent, together with a reasonable rate of interest, and the net sum which he actually got back (

[1996] 3 All ER 365

at 369,

[1997] AC 191

at 210). That was, of course, the loss which the lender suffered by making the advance; loss which he would not have suffered if he had not made the advance. The House of Lords rejected that conclusion. The plaintiff was not entitled to recover the loss which he suffered by making the advance; but only the loss which was the consequence of the valuation being wrong.

[61]He pointed out that there may be a difference in applying the test between a negligent valuer and a negligent solicitor: Where a loan is made on the basis of an incorrect and negligent valuation it is not difficult to find an answer to the question 'what are the consequences of the valuation being wrong' by comparing the position as it was represented to be with the position as it actually was; and subtracting one valuation from the other. The position is, I think, potentially more complex where the negligence is that of a solicitor. The information provided (or which ought to be provided) by a solicitor carrying out his retainer in a domestic mortgage transaction goes beyond questions of value; although it may well be relevant to value. The information may go simply to title; in which case it may affect value directly, or it may affect the marketability of the property. The information may go to price; in which case it may affect value.… But, although the test may be more difficult to apply in cases against solicitors, it is necessary to attempt to do so; that is to say, to answer the question 'what are the consequences of the information provided by the solicitor being wrong or incomplete' by comparing the position as it was represented to be with the position as it actually was.

[62]He went on to apply that test to three of the cases before him: If that test is applied to the facts in Fancy & Jackson it leads, I think, to the conclusion that the defendants are not only not responsible for the whole of the loss suffered by the society; they are not responsible for any part of it. The defendants ought to have informed the society that they did not have an official search certificate. If they had done so, the society would not have authorised the advance--or, at least, would not have authorised completion on 6 October 1989. But the loss which the society has suffered as a consequence of making the advance on 6 October 1989 is not caused by the absence of an official search certificate on that day. The title to the property taken as security was not, in fact, defective. The society obtained what it intended to obtain when it decided to enter the transaction. The loss which occurred would have occurred in exactly the same way and to exactly the same extent if the defendants had had what, by implication, they represented they did have on 6 October 1989--namely a clear search certificate showing good title to the property. The position is different in the case of Steggles Palmer. I have held that the defendants were in breach of duty in failing to notify the society that the transaction was by way of sub-sale; in failing to notify the society that they could not confirm that the borrower was to pay the balance of the purchase moneys from his own resources; and in breach of duty in failing to tell the society that they were also acting for the vendor. I have also held that if the society had known of those matters it would not have made the advance. But that is not, in my view, because the society would have been unwilling to lend what it did lend on the security of that property. In deciding how much to lend on the security of the property the society was relying on its own valuation; and there is no evidence that that valuation was wrong, or that it would have been affected by knowledge of the sub-sale or the relationship between vendor and purchaser. The reason why the society would not have made the advance is, in my view, because the society would have been unwilling to lend to that borrower in order to fund a purchase from that vendor. If the society had known what it should have known, it would decided that Mr Whittaker was a borrower to whom it did not wish to lend. In those circumstances it seems to me fair, and in accordance with Lord Hoffmann's test, that the defendants should be responsible for the consequences of the society not being in the position to take the decision which it would have taken if the defendants had done what they should have done. That is to say, the defendants should be responsible for the loss suffered by the society as a result of lending to Mr Whittaker. That, subject to questions of mitigation and contributory negligence, is the whole loss arising from the advance. I do not think it right to take the same view in the case of Colin Bishop. I am not persuaded that disclosure of the 'back to back' arrangement and the price differential would have led the Cheshunt society to the view that Mr Moran and Miss Ging were persons to whom it did not wish to lend. There was no evidence that they were connected with the intermediate vendor, Mr Slater. I think that the disclosure would have led the Cheshunt society to doubt the valuation that it had obtained for the property. The advance would not have been made because the society would been unwilling to lend the amount which it did lend without a further valuation. If that is the correct analysis, then--if, indeed, the property had been overvalued--the defendants should be responsible for the loss suffered by the society as a consequence of the Cheshunt society taking a security which was less valuable than it thought. The defendant's failure to disclose what he should have disclosed had the consequence that the Cheshunt society did not obtain the advice as to value which it was entitled to have. The position seems to me indistinguishable from the valuer cases considered in SAAMCO itself. If the property was not, in fact, overvalued, then there is no loss for which the defendant is responsible. The true value of the property at the date of the advance, 7 September 1989, is a matter which (if it cannot be agreed) will have to be determined on evidence adduced at a further hearing.

[63]It is to be noted that in the Steggles Palmer case the lender was able to recover the whole of its loss because they would not have lent at all. That loss is not capped as in the negligent valuer cases. Fiduciary Duty

[64]There is a full review of the authorities in the decision of Blackburne J in Nationwide Building Society v Balmer Radmore [1999] PNLR 606 at 660 – 672. It is not necessary for me to repeat his analysis. At page 672 Blackburne J expressed his conclusion: Basing myself on these authorities, I take the view that, except where the fiduciary has acted dishonestly or in bad faith (or its equivalent), the correct approach to equitable compensation for breach of fiduciary duty is to assess what actual loss, applying common sense and fairness, has resulted from the breach, having regard to the scope of the duty which was broken. I am also of the view that nothing in the authorities compels me to disregard any inference which, on the evidence, can properly be drawn as to what would have happened if the fiduciary had performed his duty. Failing any such evidence, however, the beneficiary is entitled to be placedin the position he was in before the breach occurred. This assumes that he can show that the breach was causally relevant to the course of action which has given rise to his loss in the sense that, but for the breach of duty, the beneficiary would not have acted in the way which has caused his loss.

[4]Application to present cases

[65]In each of the 3 cases it is pleaded that if Watson & Brown had complied with their common law and fiduciary duties these transactions would not have occurred. Apart from the fact that no defence has been filed it seems to me that the pleading represents the reality of the situation. The lenders required a significant deposit from the borrowers whereas in reality none was being provided. If the lenders had known that there was no deposit they would not have lent. If they had offered a lesser sum none of these borrowers would have gone ahead.

[66]In those circumstances it seems to me that the measure of damages for breach of the common law duty is governed by the approach of Chadwick J in the Stegles Palmer case. In my view the Claimants are entitled to the loss arising from entering into the transaction. It is not capped as in SAAMCO.

[67]Alternatively applying the test proposed by Blackburne J the loss that has resulted from the breach of fiduciary duty is the losses suffered as a result of entering into the transactions. 4.1 Mr and Mrs Morkot

[68]This loss is relatively modest as fortunately GMAC have written off the loss of £110,000.

[69]I accept that Mr and Mrs Morkot paid the reservation fee and £2,642.13 on completion. The sum of £4,106 claimed is taken into account in the claim for £2,642.13. It is thus not allowed.

[70]I also accept that some loss was made on the letting. However, especially in the light of the other cases I am not satisfied with the claim for £850 for sundry expenses. The bundle does not make clear what they comprise. If, as I suspect, they include the broker fee of £500 this is included in the figure of £2,642.13.

[71]Thus I would award a total sum of £4,840.24 (£2,000+£2642.13+£1,048.11-£850) 4.2 Mr Bellew and Mrs Knight – Flat 34 Costs of Transaction

[72]In the light of the evidence relating to Flat 7 I accept that Mr Bellew did pay the £3,847.64 direct to Morris Properties. Morris Properties then paid it to Watson & Brown and it appeared on the ledger. I also accept that he paid the reservation fee of £2,000 and a further sum of £1,000 to Watson & Brown.

[73]In the absence of any documentary evidence I cannot accept that he paid the £6,065.03 finder’s fee. The legal fees of £4,044.01 are included within the £3,847.64. Thus I would award £6,847.64 under this head. Loss in Value of the Property

[74]Flat 34 was purchased for £249,995 less the discount of £37,499.45. It is now worth £115,000. The loss is accordingly £97,495.55 (£249,995-£37,499.45-£115,000) Trading

[75]I propose to accept the figures in the updated schedule save that I propose to disallow the sundry expenses of £2,627.89. There is no evidence of the claim for £920 valuation fee; the broker fee and engrossment fees are included in the original completion statements. In my view the claims for the TV licence and internet are too remote. I would allow £50,788.06 (£53,415.95 - £2,627.89)

[76]The overall award for this transaction is £155,131.30 4.3 Mr Bellew and Mrs Knight – Flat 7 Costs of Transaction

[77]I accept that Mr Bellew did pay the £2,654.06 direct to Morris Properties. I also accept that he paid the reservation fee of £2,000 and a further sum of £1,000 to Watson & Brown. The claim for £2,380 is taken into account in the figure of £2,654.06.

[78]In the light of the documentary evidence I accept that he paid the fee of £89.08. This was not a finder’s fee but was a fee for registering at Leeds University.

[79]The claim under this head is thus £5,743.12 Loss in Value of the Property

[80]Flat 34 was purchased for £238,000 less the discount of £35,700. It is now worth £125,000. The loss is accordingly £77,300. Trading

[81]I propose to accept the figures in the updated schedule save that I propose to disallow the sundry expenses of £780.62 and the valuation advice of £920. There is no evidence of the claim for £920 valuation fee. The sundries include the broker fee, the initial management fee and engrossment fees which are included in the original completion statements. In my view the small claims for payments to Evtol are unexplained and too remote.

[82]Thus I would award £48,760.49 under this head.(£50,461.11 - £920 - £780.62).

[83]The overall award for this transaction is £131,803.60