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Case No: QBENF 98/1475 A2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Friday 10th March 2000
B e f o r e :
LORD JUSTICE ROCH
LORD JUSTICE WARD
and
MR JUSTICE GAGE
- - - - - - - - - - - - - - - - - - - - -
MOTOR CROWN PETROLEUM LTD
-v-
(1) SJ BERWIN & Co (a firm)
(2) RICHARD UNWIN
- - - - - - - - - - - - - - - - - - - - -
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
- - - - - - - - - - - - - - - - - - - - -
Edward Bannister, QC (instructed by Messrs Barlow Lyde Gilbert, London
for the Appellant)
Robin Purchas, QC & Suzanne Ornsby (instructed by Messrs Kirkwoods,
Epsom for the Respondent)
- - - - - - - - - - - - - - - - - - - - -
Judgment
As Approved by the Court
Crown Copyright ©
LORD JUSTICE ROCH:
The Decision
This is an appeal from the judgment of Longmore J entered for the respondents
against the appellants in the sum of £869,545.39 being £626,814.40
damages and interest. The judge gave judgment for a 2nd defendant, Richard
Unwin against the respondents. That judgment was dated the 2nd November 1998.
On the 18th December of that year the judge made further orders, namely:
an order that the appellants pay a further sum by way of interest to the
respondents of £39,035.31 together with interest on the judgment at the
judgment rate from the 2nd November 1998 to the 18th December;
that the respondent should pay the costs of the 2nd Defendant, Mr Unwin, to be
taxed if not agreed;
that the appellants should indemnify the respondents in respect of Mr Unwin's
costs incurred on or after the 11th September 1997, the date on which the
appellant's amended their defence to allege that any failure by them to fulfil
their obligations to the respondents had been caused by the 2nd defendant's
failure to provide the appellants with certain relevant documents;
that the appellants should pay the respondents costs of the action save in so
far as such costs were incurred only against the 2nd defendant, such costs to
be taxed of not agreed;
that the appellants should pay the respondents the costs of the hearing on the
18th December 1998 to be taxed if not agreed, and finally;
that the respondents, in so far as it was required, should be granted leave to
appeal against the order for costs.
The Parties
The respondents are a private limited company engaged in the development and
operation of petrol service stations. At one time the company was known as
Matzest Motors Limited. The owner and managing director of the company was Mr
Kevin Reardon.
The appellants are a well known firm of solicitors. One of the fields of the
law in which they practise is that of Town and Country Planning. The
respondents formally retained the appellants as the respondents solicitors to
act for the respondents in a planning appeal on the 24th December 1991.
The retaining of the appellants by the respondents was at the suggestion of the
2nd defendant, Mr Unwin who is a fellow of the Royal Institution of Chartered
Surveyors practising from offices in Manchester and holding himself out as
experienced in matters relating to Town and Country Planning.
The history of the Planning Application
In July 1991 the respondents acquired a triangular site of ½ a hectare
located on the roundabout where Segensworth Road and Southampton Road (the A27)
meet in Fareham, Hampshire. The southern boundary of the site was the old
Segensworth Road and two lines of trees bordering the old Segensworth Road as
it had been before the roundabout and a new link to the M27 to the north of the
roundabout was constructed. The respondents paid £150,000 for the site,
although it was agreed between the parties at the trial that the market value
of the site without planning permission was £5,000.
The 2nd defendant was retained and employed by the respondents as their Town
and Country Planning expert in respect of the site in July 1991. On the 7th
August 1991 the 2nd defendant submitted the respondents' application for
planning permission to the local planning authority, the Fareham Borough
Council. The respondents' site formed the northern tip of a narrow corridor or
finger of undeveloped land situated between Locks Heath and Titchfield. On the
1st October 1991 there was a meeting between planning officers of the local
planning authority, Mr Nye the Chief Planning Officer and a Mr Stanniland and
the 2nd defendant and two other persons representing the respondents. At that
meeting Mr Nye made clear his opposition to the respondent's site being
developed.
There was a concurrent planning application by a company known as ABT in
respect of the respondents site and additional land to the south of the
respondents' site forming part of the corridor or finger of undeveloped land.
On the 11th December 1991 the Planning Committee of the Fareham Borough Council
met to consider the respondents' application and ABT's application. The
committee had before it a report by the Chief Planning Officer recommending
refusal of both applications. The planning committee refused both
applications.
Following that refusal the 2nd defendant advised the respondents to appeal it
being his opinion that an appeal had a 65% chance of success. He suggested
that for the purposes of the appeal the respondents should retain the services
of the appellants as their solicitors. On the 24th December 1991 the
respondents formally instructed the appellants to bring an appeal on their
behalf. On the 7th January 1992 the Local Planning Authority notified the
respondents of the refusal of planning permission. On the same day the partner
in the appellant firm who was to oversee the respondents appeal, Mrs Thomas,
met Mr Reardon and expressed the view that an appeal was worth pursuing and
that the chances of a successful appeal were little better than 50/50. The
person within the appellant firm who had the immediate handling of the appeal
was a Mr Drukarz. On the 10th January 1992 the appeal documents were lodged by
the appellants on the respondents' behalf..
Counsel Mr W Hicks was instructed by the appellants. The first conference with
counsel was held on the 19th March 1992. The preparation of the appeal
included a second conference with counsel on the 7th April 1992. The hearing
of the appeal opened on the 27th May 1992 before Inspector Machin. On the 15th
July 1992 the Inspector dismissed the respondents' appeal.
The Development of the Local Plan
The respondents application for planning permission to the Fareham Borough
Council and the respondents appeal against that authority's refusal of their
application took place during a period in which a new local plan was being
developed. That plan, once finalised, would have increased the importance in
planning applications and planning appeals of the policies contained in that
plan because of the introduction into the Town and Country Planning Act 1990 of
s. 54A. That section, which came into force on the 25th September 1991,
provides:
"Where, in making any determination under the planning Acts, regard is to be
had to the development plan, the determination shall be made in accordance with
the plan unless material considerations indicate otherwise."
The meaning of development plan outside the area of Greater London and the
Metropolitan Counties is to be found in s. 54 of the Act. The development plan
consists of
"(a) the provisions of the structure plan for the time being in operation in
the area;
(b) any alterations to that structure plan; ........
(c) the provisions of the local plan ...... for the time being in operation in
the area;
(d) any alterations to that local plan; ......
together with the resolutions of the authority who made or altered the plan
....."
The Western Wards of Fareham Action Area Plan 1979 provided under the heading
"Countryside Areas"
"The areas to which the countryside polices will apply are shown on the
proposal's map"
In March 1989 a new local plan intended to supersede the Western Wards Plan was
placed on deposit and became the Deposit Draft of the Fareham Borough Local
Plan. Section 3 of that Deposit Draft set out its "Coast and Countryside
Policies". Policy C1 provided as follows:
"In the Coast and Countryside area shown on the proposals, there is a general
presumption against development and in the strategic gaps shown on the
proposals maps this is a strong presumption. In the coast and countryside,
planning permission will normally only be granted for development which is:
either, essential for the efficient use of agricultural or horticultural or
forestry land with an overriding need for a countryside location; or of an
outdoor recreational use, such as a sports ground, golf course or park which
does not require major new buildings or structures; or the redevelopment, reuse
or limited extension of an existing building ....."
On the Deposit Local Plan the corridor or finger including the respondents'
site was shown as a coast and countryside area but not as a strategic gap.
The structure plan relevant to this area was the South Hampshire Structure Plan
1988. In that plan the County Council had developed a "Countryside Heritage
policy to conserve the diversity and attractiveness of Hampshire's
countryside". Several of those policies require a brief description because
they featured in the Planning Appeal before Mr Machin and in the evidence and
submissions heard by the judge and in the submissions heard by this court. The
first E1 was that:
"Development will not normally be permitted outside existing or proposed built
up areas ....."
That was to protect the countryside from scattered or sporadic development, the
policy providing a general presumption against new development outside existing
urban areas and planned extension to them. Exceptions might be made to the
general rule for such uses as small scale industries and redundant buildings,
development associated with the rural economy, agricultural or replacement
buildings and development associated with countryside recreation. The second
policy was E3 namely that:
"Development which adversely affects the landscape will not normally be
permitted."
Landscape in this policy was also to include landscape within urban areas. The
final policy that requires stating is E6, namely:
"There will be a strong presumption against development in open areas which
provide gaps between settlements."
The Local Plan Inspector who held an inquiry into objections to the Deposit
Local Plan and who reported on the Deposit Local Plan and made recommendations
was Mr Gill. That inspector reported on the 8th April 1991. In that report
the inspector commented on the corridor or "green finger" of which the
respondents' site formed the northern tip. The relevant paragraphs were:
"1.140 The WWFLP showed the "green finger" extending northwards beyond the
roundabout, along the A27 and pointing to the countryside outside the built up
area. There can be advantages for wild life with these sorts of corridors but
this one is more easily seen on a map than on the ground. The FBLP has now cut
out the length of the A27 towards junction 9 but has kept the roundabout in the
open countryside. I find it hard to accept that this isolated pocket of green
encircled by busy roads can be considered even for the notation let alone the
description as countryside. In addition the area is almost surrounded by large
scale commercial buildings. The exception is the objection site but even here
FBC was prepared to see an hotel. Development would not affect the amenities
of residents in Segensworth Road and Titchfield Park Road nor impinge on the
area of ecological value. Planning conditions would ensure that the visual
impact was agreeable. I think that development of the kind proposed by ABT
might perhaps be considered favourably.
1.141 I was not being asked to judge a planning application, however, and there
are several aspects to be agreed before a decision could be made. If a consent
were to be given then it would be better if the countryside notation were
deleted and the roundabout reconsidered at the same time. It would not be
right to anticipate this sort of outcome by allocating land now in the FBLP.
1.142 I recommend that there be no change to the Local Plan."
The objection site referred to by the Local Planning Inspector consisted of the
respondents' site and an area of about one and half hectares immediately to the
south of the respondents' site. The objection was that of a commercial concern
referred to as ABT.
The Fareham Borough Council sought clarification of certain parts of the
inspector's report, one of which was the passage cited above. The Planning
Directorate of the Department of the Environment passed the request for
clarification on to the inspector on the 23rd July 1991 in the following
terms:
"Is it to be assumed that there is no merit in retaining this site in the
countryside? If so, why is it not right to reallocate the site now? Does this
indicate that there is in fact some uncertainty about whether there is need for
the development proposed, or some concern that the development would cause
traffic problems?"
On the 7th August 1991 the inspector sought to clarify his report by
writing:
"Yes, I do not believe that this site should be retained in the countryside.
FBC accepted the idea of an hotel here at one time and I thought that the kind
of development being proposed by ABT might be considered favourably. I was not
considering a planning application however and did not feel able to recommend
an allocation. One approach would be to show the site as white land, but since
this notation does not appear at all in the Fareham Borough Local Plan I
concluded that there should be no change. In the light of what was said in my
report, I assumed that either planning permission would have been given by the
time the local plan was adopted or some other proposal would have emerged."
The Inspector's further observation was conveyed to the Fareham Borough Council
by the Department on the 9th August 1991. The letter from the Department to
the Inspector seeking clarification, the Inspector's reply and the letter of
the Department to the Fareham Borough Council forwarding the Inspector's
clarification, were referred to before the judge as the "Addendum".
Thereafter the Fareham Borough Council published the Statement of the Council's
Decision on the Inspector's Report and Recommendations on the 20th September
1991. That document contained the following note:
"Local Authorities are not obliged to accept the Inspector's recommendations:
they are however required to prepare a statement of their decision on each
recommendation with reasons. It is particularly important that on each point
where an authority do not accept a recommendation they not only make this clear
but provide a clear explanation, including the relevant substantive arguments,
of the reason for their decision."
This note reflects the terms of Regulation 29 of the Town and Country Planning
(Structure and Local Plans) Regulations, 1982.
Appendix 1 attached to that document in relation to the site the subject of
ABT's objection set out the Inspector's recommendation that there be no change
to the Local Plan and the comments contained in the Inspector's report. The
clarification of his comments contained in his letter of the 7th August 1991
did not appear in that Appendix. The comments of the local Planning
Authority's officers were:
"In response to the Inspector's comments, a planning application for this site
is being submitted and will need to be considered on its merits, following
which any necessary departure or alteration procedures can be followed. The
County Surveyor regrets that no reference was made to the highway issues
relating to the site. The Highway Authority would maintain its opposition to
access to the site from the A27, in particular because it could prejudice the
possible improvements to the Segensworth roundabout. The traffic impact of any
proposed development on this roundabout and M27 Junction 9 would need to be
assessed in detail."
At this stage the Deposit Local Plan would not be part of the Development Plan,
so that the newly in force s. 54A would not apply to its contents.
On the 23rd January 1992 Fareham Borough Council told Mr Drukarz that the
deposit Local Plan was likely to be adopted on the 31st of that month. On the
28th January 1992 the appellants requested the Department of Environment to
direct Fareham Borough Council to defer adoption of the Deposit Local Plan
until the Secretary of State had decided whether or not to call the plan in.
The appellants suggested that the Council had failed to consider the
respondents' proposals in the light of the Inspector's full recommendations
relating to the site. And that the adoption of the Plan should be delayed
because of the impact of s. 54A of the 1990 Act would have on the respondents'
interests. On the 31st January the Department of the Environment declined to
direct the Fareham Borough Council to delay adopting the Plan or to call the
plan in. Consequently the Plan was adopted on that date.
Notice of Adoption was published on the 5th February 1992. Under s. 287 of the
1990 Act the respondents had a period of six weeks from that date in which to
mount a challenge to the Local Plan on the ground of failure to comply with
Regulation 29 of the 1982 Regulations. That period expired on the 18th March
1992. Once that period had expired the validity of the Local Plan could not be
questioned in any legal proceedings whatsoever, see s. 284 of the Act. The
effect of the expiry of that period was summarised by the judge in his judgment
in a way which was accepted by both parties to this appeal. The judge said:
"Prior to the adoption of a Local Plan, an Inspector's Report in respect of it
can constitute a material consideration of substantial weight in considering a
determination under s. 70 of the 1990 Act: see Ravebuild Ltd -v- Secretary
of State for the Environment and Hammersmith and Fulham Borough Council
[1996] JPL 107. In contrast with the above proposition, once a Local Plan has
been adopted such a report is of no materiality: see Jeantwill Ltd -v-
Secretary of State for the Environment and Cherwell District Council [1993]
JPL 445."
The Judgment
The judge found that Mr Reardon the Managing Director of the respondents knew
virtually nothing about planning, was heavily reliant on others for advice in
that respect and that Mr Reardon would not usually start a legal process unless
his advisors could say that it would be more likely to succeed than to fail.
The judge found that although Mr Unwin failed to obtain the documents referred
to as the Addendum until requested to do so by counsel, Mr Hicks at the
conference on the 19th March 1992, the appellants had the Local Planning
Authority's Statement of Decisions on the Inspector's Report and
Recommendations well before the 18th March 1992.
The judge found that the appellants should have advised the respondents to
challenge the Adopted Local Plan and that the respondents would have accepted
and acted on such advice had it been given. The judge went on to find that
such a challenge would have been successful and as a consequence, the
respondents' appeal against the refusal of their application for planning
permission for their site would have been in the context of a Development Plan
in which the appeal site was not designated as Coast and Countryside. The
judge went on to find that if such a challenge had been mounted then the
respondents' appeal would have followed the challenge and would have come
before a different inspector. Such an appeal would have had a real or
substantial chance of success. The chance of such an appeal being successful
would not have been merely fanciful or speculative. The judge assessed the
chances of success in such an appeal at 40%.
The judge awarded damages on the basis that the site with Planning Permission
for a petrol filling station and with such a petrol filling station having been
constructed and in operation would have been worth just over £2.3 m. From
that figure were to be deducted the costs of constructing the petrol filling
station agreed at £750,000 and a further £5,000 being the value of
the site following the unsuccessful appeal before Inspector Machin, that is to
say the site with no prospect of obtaining planning permission for any
development, unless the Local Planning Authority altered its attitude to the
site and redesignated the site in the Local Plan. The resulting figure was a
little over £1.5 m. and 40% of that figure came to the sum awarded by the
judge as damages in his judgment, that is to say £626,814.40.
Grounds of Appeal
Mr Bannister for the appellant has argued three grounds of appeal. The first
is that this case was not a "lost chance" case and the judge was in error in
dealing with the case on the principle found in Allied Maples -v- Simmons
and Simmons [1995] 1 WLR 1602 CA. Second, that the judge's assessment of
the chances of a Planning Appeal being successful following a successful
challenge to the Local Plan at 40% was against the weight of the evidence.
Moreover the manner in which the judge made his assessment was inadequate
because the judge did not review and analyse the expert evidence he had heard
despite saying that the expert evidence he had heard had been of assistance to
him on this issue. Mr Bannister criticised the judge in this part of his
judgment as having failed to analyse the evidence properly or to give adequate
reasons for the conclusion he reached. Had the judge subjected the evidence to
proper analysis and sought to find cogent reasons for his conclusion, the judge
would have realised that the conclusion he had reached was not available to him
on the evidence he had heard. Third, the judge should have deducted the sum
paid by the respondents for the site, namely £150,000 from the value of
the site with Planning Permission and not merely £5,000 for the value of
the site without Planning Permission when quantifying the plaintiff's loss.
The First Ground of Appeal
This point was not taken in the court below. Mr Bannister, QC for the
appellants told us that it was accepted on all sides at trial that the
Allied Maples principle applied to the question "What would have been
the result of the Planning Appeal had the C1 designation been quashed?" On
this approach, provided that there was, as a matter of causation a real or
substantial, as opposed to speculative chance that the appeal would have
succeeded, quantum would have been calculated by reference to the value of that
chance. As a result of further consideration of the point following the
judge's decision, Mr Bannister believed his concurrence in this approach to the
case had been wrong. What had been in issue in the Allied Maple's line
of cases was the loss of the right or opportunity to take some step which, if
taken, might, depending upon the actions of a third party, have produced a
valuable benefit for the claimant. In such a case, once it is established that
the defendants' fault caused the opportunity to be lost, the court is faced
with the task of putting a value on the opportunity lost by assessing the
degree of chance that it would have come good. That was to be contrasted to
the present case where, on the judge's finding, the respondents had bought the
site which from the moment of its acquisition was never, on the balance of
probabilities going to obtain consent. It was not the appellants' negligence
which had caused the respondents to fail to obtain planning permission for the
site; it was the fact that the site was never going to achieve planning
permission for a petrol filling station or for any other purpose. The site as
a development site had been doomed from the outset.
Mr Bannister submitted the case fell within the principle of Hotson -v-
East Berkshire Health Authority [1987] AC 750. The issue was whether the
appellants' breach of contract or negligence caused the respondents to fail at
the appeal inquiry before Mr Machin. That issue had to be decided on the
balance of probabilities. The judge's finding that the respondents had a 40%
chance of succeeding on an appeal even with a successful challenge to the
Local Plan is a finding that the respondents had not established on the balance
of probabilities that the appellants' failure to challenge the Local Plan had
caused the respondents any loss.
Mr Bannister took us to the facts and decision in Hotson's case. In
that case a boy fell and sustained an acute traumatic fracture of his left
femoral epiphysis. He was taken to hospital where there was a failure to
diagnose correctly his injury for some five days. Consequently the injury was
not treated. In the result the boy suffered permanent and serious damage to
his hip joint. In an action for damages brought on the boy's behalf, Simon
Brown J, as he then was, found that even if the injury had been correctly
diagnosed on admission to hospital and prompt treatment had been given, there
was a high probability which the judge assessed at 75% that the serious and
permanent damage to the hip would still have developed. The judge held that
the plaintiff was entitled to damages for the loss of the 25% chance that he
would, with prompt treatment, have made a nearly full recovery. The Court of
Appeal upheld this decision. On appeal by the Health Authority the House of
Lords allowed the appeal, deciding that it was for the plaintiff to establish
on the balance of probabilities that the delay in treatment had at least
materially contributed to the development of the permanent damage to the hip.
On the judge's finding, based on his view of conflicting medical evidence, the
plaintiff had failed to do this. The judge's findings of fact had been
unmistakably to the effect that on the balance of probabilities the initial
injury had been the sole cause of the permanent damage to the hip.
Mr Bannister submitted that the respondents site was in effect the equivalent
to the boy's left hip after the boy's accident. On the balance of
probabilities, it was never going to be developed.
Mr Bannister was right to draw our attention to the case of Hotson in
which the speeches of the members of the House of Lords are instructive. Their
Lordships made it clear that the first step for a judge is to analyse whether
the question he has to answer is one of causation, in which case it must be
decided on a balance of probabilities, or whether it is an assessment of
damage, in which case if what has been lost is a chance, then the assessment of
that lost chance is to be made on a percentage basis provided that the lost
chance was real or substantial and not negligible. Their Lordships in
Hotson's case were agreed that the question for the judge had been one
of causation and not one of assessment of lost chance. For example, in his
speech at page 792 E - H Lord Ackner said:
"In the result the judge had by his clear findings decided that the negligence
of the defendants in failing to diagnose and treat for a period of five days
had not caused the deformed left hip. The judge, in agreement with the
submission made to your Lordships by counsel for the defendants, said in terms
that in the end the problem came down to one of classification [1985] 1 WLR
1036, 1043-1044:
"Is this on true analysis a case where the plaintiff is concerned to establish
causative negligence or is it rather a case where the real question is the
proper quantum of damages?"
The judge thought at p. 1044 that the case "hovers near the border." To my
mind, the first issue which the judge had to determine was an issue of
causation - did the breach of duty cause the damage alleged. If it did not, as
the judge so held, then no question of quantifying damage arises. The debate
on the loss of chance cannot arise where there has been a positive finding that
before the duty arose the damage complained of had already been sustained or
had become inevitable."
It is of interest in this case, that Lord Ackner went on to say at page 792-H -
793A:
"Kitchen -v- Royal Airforce Association [1958] 1 WLR 563 has no
relevance to this appeal. In that case there was an undoubted breach of
contract which caused the plaintiff to suffer more than nominal damages. By
reason of the solicitor's negligence, she had lost a worthwhile action. What
the court there had to do was to value that action. It is, of course, obvious
that it is not only actions that are bound to succeed that have a value. Every
action that has a prospect of success has a value and it is a familiar task for
the court to assess that value where negligence has prevented such an action
being brought."
At first sight, the submissions of Mr Bannister were compelling. On proper
analysis of the facts and the judge's findings in this case my judgment is that
these submissions must be rejected.
In the case of Allied Maples Group Ltd -v- Simmons & Simmons (A
Firm) [above] the plaintiffs wished to take over four department stores
owned by a subsidiary company of the vendor company. The plaintiffs engaged the
defendants as their solicitors to act for them. The leases of the department
stores were personal to the subsidiary company. To avoid loss of the leases,
the plaintiffs agreed with the vendor company to purchase the subsidiary
company's issued share capital, while all the subsidiary company's other assets
and liabilities were sold to another subsidiary company in the vendor group of
companies. The defendants drafted an agreement with a warranty which would
have given the plaintiffs complete protection against existing or contingent
liabilities of the subsidiary company in respect of any properties leased by
it. In the course of negotiations that warranty was replaced by a term which
gave the plaintiffs protection only against such liabilities as should, as a
matter of accountancy practice, have been provided for in the completed balance
sheet. Contingent liabilities of the subsidiary company materialised which
were not liabilities which should have been provided for in the completed
balance sheet. Consequently the plaintiffs had no protection against such
liabilities. The plaintiffs sued the defendants. At the trial of preliminary
issues, the judge found on the balance of probabilities that there was a real
and not a speculative chance that the plaintiffs could have renegotiated with
the vendor company so as to obtain proper protection against the liabilities of
the subsidiary company which had materialised. The judge also held that the
defendants had been negligent in allowing the plaintiffs to proceed with the
acquisition without advising them of this risk. The damage was the loss of the
chance to renegotiate.
The defendants appealed to the Court of Appeal. The appeal was dismissed.
This court held that where the defendants negligence consisted of an omission,
causation depended on the hypothetical question of what the plaintiffs would
have done if the omission had not occurred. That was a matter of inference to
be determined from all the circumstances and was to be decided on the balance
of probabilities. When the plaintiffs' loss depended on the hypothetical
action of a third party, they were entitled to succeed if they could show that
there was a real or substantial, rather than a negligible, chance that the
third party would have acted so as to confer the benefit or avoid the risk to
the plaintiffs. At page 1609 H of the report Stuart Smith LJ said:
"In these circumstances, where the plaintiffs' loss depends upon the actions of
an independant third party, it is necessary to consider as a matter of law what
it is necessary to establish as a matter of causation, and where causation ends
and quantification of damage begins."
At page 1610 C the judgment goes on:
"(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. But again, if he does establish that,
there is no discount because the balance is only just tipped in his favour.
.............
(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, as in this case, or
independently of it. In such a case, does the plaintiff have to prove on
balance of probability, as Mr Jackson submits, that the third party, would have
acted so as to confer the benefit or avoid the risk to the plaintiff, or can
the plaintiff succeed provided that he shows that he had a substantial chance
rather than a speculative one, the evaluation of the substantial chance being a
question of quantification of damages?
Although there is not a great deal of authority, and none in the Court of
Appeal, relating to solicitors failing to give advice which is directly in
point, I have no doubt that Mr Jackson's submission is wrong and the second
alternative is correct."
Turning to the facts in the present case, the obligation on the appellants was
to advise the respondents that they could challenge the Local Plan; that that
challenge had a real prospect of success and if successful would improve the
respondents' chances of successfully appealing the Local Planning Authority's
refusal of their application for planning permission. The appellants omitted
to give that information and advice to the respondents. Causation then
depended upon the answer to the hypothetical question "What would the
respondents have done if given that information and advice?" The judge has
dealt with that question on the balance of probabilities and found that the
respondents would have challenged the Local Plan. The judge has gone further
and decided, again on the balance of probabilities, what the outcome of such a
challenge would have been. He has found that it would have been, on the
balance of probabilities, successful. On those findings, what was lost by the
respondents in this case was the opportunity to appeal the refusal of the
application for planning permission for their site in the context of the site
being removed from the Countryside Designation and therefore free of the C1
Policy. In this appeal Mr Bannister has submitted, as Mr Jackson submitted in
the Allied Maples case that the respondents had to prove on the balance
of probability that a planning inspector in such an appeal would have allowed
the appeal and granted planning permission. In my judgment that analysis is
not correct. The chance of an appeal, following a successful challenge to the
Local Plan being successful was a question of quantification of loss and,
provided the chances of such an appeal being successful were substantial and
not negligible the judge was entitled to assess that loss on a percentage
basis.
The opportunity that was lost was the opportunity to challenge the Local Plan.
The judge found that the respondents would have challenged and would have
challenged successfully. The value of that lost opportunity has to be
assessed. The judge did that by assessing the chances of an appeal against
refusal of planning permission in the context of a successful challenge to the
Local Plan and the site being undesignated and therefore not subject to Policy
C1 being successful. This analysis can be tested by considering what would
have happened if counsel in the conference of the 19th March 1992 had advised
the respondents that because the Local Plan could no longer be challenged,
their appeal against refusal of Planning Permission had no prospect of success
and should be abandoned. In those circumstances, in a trial in which the judge
made the same findings as Longmore J made in this case, the appellants could
have had no defence to the respondents' claim apart from that of establishing
that an appeal, to a Planning Inspector, following a successful challenge would
not have had a real or substantial chance of success, but merely a negligible
chance of success.
The Second Ground of Appeal
The second ground of appeal is that the judge's finding that the respondents
would have had a 40% chance of success at a Planning Appeal following the
quashing of the Local Plan was against the weight of the evidence. Further,
given the way the judge dealt with this crucial issue, it is open to this court
to reach its own conclusion on the question, which should be that the chance of
such an appeal being successful was negligible.
Mr Bannister's principal criticism of the way the judge dealt with this issue
was that the judge did not remind himself of the evidence of the three expert
witnesses on this point; still less did the judge attempt to analyse their
evidence or, if he was rejecting the opinions of the experts called on behalf
of the defendants why he was doing that. Mr Bannister referred us to the case
of Flannery -v- Halifax Estate Agencies Ltd [2000] 1 All ER 373 CA in
which an appeal was allowed and a new trial ordered because of the failure by
the trial judge to give reasons for the conclusion he had reached which was to
prefer the expert evidence called on behalf of the defendants to that called on
behalf of the plaintiffs, in a case where the issue was whether the flat the
plaintiffs had purchased had subsidence damage at the time the property was
inspected so that the defendants were in breach of contract and negligent,
their valuer, who had inspected the property, having failed to detect any
subsidence. In the judgment of this court delivered by Henry LJ this court
found that the first instance judgment given in that case was "entirely opaque
- it gives the judge's conclusions, but not his reasons for reaching that
conclusion." This court made certain general comments on the duty of a judge
to give reasons. The first of which was:
"(1) The duty is a function of due process, and therefore of justice. Its
rationale has two principal aspects. The first is that fairness surely
requires that the parties - especially the losing party - should be left in no
doubt why they have won or lost. This is especially so since without reasons
the losing party will not know (as was said in ex p Dave) whether the
court has misdirected itself, and thus whether he may have an available appeal
on the substance of the case. The second is that a requirement to give reasons
concentrates the mind; if it is fulfilled, the resulting decision is much more
likely to be soundly based on the evidence than if it is not. ..............
(3) The extent of the duty, or rather the breach of what is required to fulfil
it, depends on the subject matter. Where there is a straightforward factual
dispute whose resolution depends simply on which witness is telling the truth
about events which he claims to recall, it is likely to be enough for the judge
(having, no doubt, summarised the evidence) to indicate simply that he believes
X rather than Y; indeed there may be nothing else to say. But where the
dispute involves something in the nature of an intellectual exchange, with
reasons and analysis advanced on either side, the judge must enter into the
issues canvassed before him and explain why he prefers one case over the other.
This is likely to apply particularly in litigation where as here there is
disputed expert evidence; but it is not necessarily limited to such cases."
Here the judge heard three expert witnesses, Mr Robinson for the respondents
who expressed the view that the chances of a Planning Appeal being allowed
following a successful challenge to the Local Plan were 75%. The appellants'
expert Mr Bullock expressed the view that challenge or no challenge and
whatever the outcome of that challenge, the respondents' appeal would have been
dismissed. Mr Bowhill, the 2nd defendants' expert said this in the conclusions
of his report:
"In any event, it is unlikely that such a challenge would have been successful.
Furthermore, the Countryside designation of the site had been confirmed on a
number of occasions (including a former appeal decision) and therefore I find
it highly unlikely that a Planning Inspector would have effectively overturned
this in respect of the Appeal."
Mr Bannister went on to point out that each expert gave oral evidence and their
views were tested by cross-examination. The judge did not when dealing with
this particular issue make any reference to the evidence given by the expert.
Mr Bannister further criticised the judge for not referring to any of the other
planning policies that would still have applied to the respondents' site even
if the designation of the site in the Local Plan as Countryside had been
quashed. Although the judge referred to having been taken by counsel through
the planning history of the "green finger" of land, the judge made no attempt
to evaluate the light that that history cast upon the chances of an appeal
following a successful challenge to the Local Plan being successful. The
appellants expert, Mr Bullock had given evidence that that planning history was
of considerable importance, particularly the dismissal of an appeal against an
enforcement order by an Inspector, Mr Martin, on the 16th January 1992 in
respect of land elsewhere in the "green finger".
Both Mr Bullock and Mr Bowhill had relied upon the fact that Policy E1 would
still have applied to the respondents' site, even if a challenge to the Local
Plan had been successful, and that s. 54A would have required any Inspector to
make his determination in accordance with that policy unless material
considerations indicated otherwise. Mr Bannister accepted that Mr Bowhill in
cross-examination had conceded that the efficacy of Policy E1 would have been
reduced following a successful challenge to the Local Plan. This aspect of the
expert evidence called by the defendants had found no place in the judges'
judgment.
These are powerful arguments which give this court cause to consider whether
this is a case where this court should put the judge's finding to one side and
consider reaching its own conclusion on the question. The relevant part of the
judge's judgment is to be found at page 34E of the transcript of his judgment
and can be set out in full:
"PROSPECT OF OBTAINING PLANNING PERMISSION FOR A PETROL FILLING STATION ON THE
SITE IF THE LOCAL PLAN HAD BEEN SUCCESSFULLY CHALLENGED
This was hotly debated. Mr Lynagh for Mr Unwin carried the burden of the
argument here. He relied strongly on Mr Nye's express opposition to any
development of the site and on the fact that this South Hampshire Structure
Plan and the WWFLP both showed the land as unallocated for development. He
took me through the history of the site applications for permission to build on
the green finger and the numerous rejections which there had been of
applications for permission for a hotel on an area including the site.
Mr Purchas submitted that the objection of the Chief Planning Officer could
hardly be definitive since the whole point of an appeal was that the Inspector
conducting the inquiry was independant of Local Planning Officers. Nor could
the Structure Plan or the old Local Plan be decisive since a new Local Plan was
emerging which was intended to supersede the old plan and Mr Gill's own
comments would be pertinent. The Council had at least contemplated the
possibility of a hotel on the site at an earlier date. A fair reading of the
Council's decision for rejection of planning permission in December 1991, and
in particular Mr Machin's reasons for rejecting the appeal in July 1992, showed
that they were both relying heavily on the fact that the application related to
a site in the countryside which the Local Plan had apparently recommended
should not be available for development. Once the Local Plan had been quashed
in respect of this site, the matter would realistically be completely open.
Having listened to the argument on this aspect of the matter, I can only say it
is not at all easy to predict what would have happened if there had been an
effective challenge to the Local Plan. I am certainly not convinced that
permission would have been granted, neither am I convinced that the chances of
obtaining permission were negligible. There are powerful arguments for
permission which could be advanced. There was development on every side of the
roundabout apart from the site. There was some, albeit challenged, evidence of
need.. Mr Unwin thought the prospects of getting planning permission were good
even without seeing the addendum.
My conclusion is that the chances of obtaining permission were not negligible
or speculative. No doubt Mr Unwin may have been somewhat optimistic in favour
of his client. Miss Thomas put the chances at little more that 50/50 when she
was asked her initial advice.. That was on the basis of the absence of any
challenge to the Local Plan. She also may have been too optimistic, but there
was, in my view an eminently respectable rather than a merely speculative
chance. I would myself put it somewhat less high than Miss Thomas did and
would assess it at 40%."
The evidence of the experts showed that there was a very wide divergence in
their views on this issue. Mr Robinson thought that there was a 75% chance of
success. Mr Bullock thought that there was no real chance of success, whether
a successful or unsuccessful challenge of the Local Plan had been mounted. Mr
Bowhill considered that a challenge to the Local Plan would have failed and
accordingly there was no prospect of an appeal succeeding.
It is clear that the judge rejected Mr Bowhill's view that a challenge to the
Local Plan would not succeed. It had to follow from that that the judge must
also have rejected Mr Bowhill's view that there was no prospect of an appeal
succeeding. The judge was not bound to chose between the opinions of Mr
Robinson and Mr Bullock. The importance of the expert evidence was that it
identified the factors which would have been in play in the hypothetical
planning appeal which would have followed a successful challenge to the Local
Plan. It is also to be remembered that in deciding this issue the judge had
before him written submissions by counsel for the defendants and counsel for
the plaintiffs setting out the competing considerations relevant to such an
appeal and counsel's submissions on each of those considerations, which
incorporated or at least reflected these experts' opinions.
Submissions made by Mr Purchas, QC for the respondents are, in my judgment, of
considerable weight in the consideration by this court of this ground of
appeal. The first submission was that the judgment was to be read by parties
wholly familiar with the issues and the facts of the case. For example,
although the judge did not refer to the planning history in detail , the
parties were all aware that no previous application for planning permission or
any previous appeal had related to the respondents' site alone, and that the
respondents' site was separated from the rest of the green finger by the
original Segensworth Road and the two lines of trees that had bordered the old
Segensworth Road. The enforcement Notice Appeal decided in January 1992 had
involved a different location in the green finger of land and many planning
factors which would not have been in play in the appeal the respondents had
lost the opportunity of bringing.
Mr Purchas's second submission was that the judge was making a value judgment
on facts that were not in dispute. The material facts are set out in the
judgment read as a whole. Once the facts are found it is a question of an
assessment which is to be made, not by experts, but by the judge. The judge
saw and heard the witnesses and saw the site. This court, submitted Mr
Purchas, not having had those advantages should be slow to interfere with the
judge's assessment.
Mr Purchas further submitted that the approach adopted by the judge was in
keeping with the way in which courts make assessments of lost opportunities,
namely that the assessment of that opportunity leading to a successful outcome
for the claimant is to be approached not on a minute examination of every
detail but on a more general estimate of the chances of success. We were
referred by Mr Purchas to a passage in the speech of Lord Reid in Davies -v-
Taylor [1974] AC 207 at 212D
"To my mind the issue and the sole issue is whether that chance or probability
was substantial. If it was it must be evaluated. If it was a mere possibility
it must be ignored. Many different words could be and have been used to
indicate the dividing line. I can think of none better than "substantial" on
the one hand, or "speculative" on the other. It must be left to the good sense
of the tribunal to decide on broad lines, without regard to legal niceties, but
on a consideration of all the facts in proper perspective. I am well aware of
the fact that in real life chances rarely are or can be estimated on
mathematical terms."
Although I accept that the judge might have expressed his reasons for reaching
the assessment he did more fully, the conclusion I have reached is that the
judge expressed his assessment and the route by which he arrived at that
assessment sufficiently to enable this court to consider whether that decision
was wrong and should be overturned in this appeal. This is not a case, in my
judgment, where the judgment was "entirely opaque", giving simply the judges'
conclusion but not his reasons for reaching the conclusion. The judge has
sufficiently discharged his duty to state reasons.
Two further submissions made by Mr Purchas are deserving of notice. The first
concerned the advice given by the appellants and by Mr Unwin to the respondents
as to the prospects of success of the appeal which was heard by Mr Machin, and
the weight which should be attached to that advice. It is clear that Mr Unwin
considered that the prospects of that appeal being successful were very good,
of the order of 65%. Miss Thomas was less optimistic believing that the
chances of success were little better than 50/50. Those assessments were made
in respect of an appeal where the Policy C1 would have to be applied by the
Inspector. It is clear from Mr Machin's decision letter of the 15th July 1992
that that policy and the adoption of the Local Plan were the two most important
factors leading Mr Machin to his decision. At one point Mr Machin wrote:
"Most importantly in my view the FBLP has now been adopted with the appeal site
and adjoining land shown as subject to countryside development restraint
policies."
A little later Mr Machin wrote:
"Therefore contrary to your view, I do not consider that the comments of the
Local Plan Inspector should now be accorded such importance as to override the
adopted polices in the FBLP."
Paragraphs 7 and 9 of Mr Machin's letter which contain the guts of his
decision, read:
"7. The proposal includes petrol pumps, car wash, toilets, a shop, telephones
and local tourist information facilities. Policy C1 of the FBLP presumes
against development in the countryside for which it is not essential to have a
countryside location. Whilst I acknowledge that petrol filling stations are
found in the countryside, they are not, in my opinion, development for which it
is normally essential to have a countryside location. I consider that your
clients' proposal would, by reason of the proposed buildings, canopy,
hardstandings, signs and illuminations, which would occupy a large majority of
the site, be highly visible, obviously purposely so to attract customers. I do
not doubt that a significant element of landscaping could be incorporated into
the proposal. Neither is there, in my view, any reason why a high standard of
design could not be achieved. Nevertheless, I consider that the proposal would
cause harm by the urbanisation of the appeal site which would thereby erode the
open appearance of the land between the Segensworth and Southampton Roads. The
changed appearance and character of the site would be dramatically evident when
viewed from the roundabout as drivers travel south east along the A27 towards
Fareham. In addition, the value of the appeal site to local residents as part
of an open area which provides visual relief from the continuous development
thereabouts would be undermined.. Finally, and of the utmost importance in my
opinion, approval in this case would undermine the integrity of the very
recently adopted countryside protection policies in the FBLP and the Council's
ability to defend them would be thrown into considerable doubt. ............
9. Whilst I see no agricultural value in the appeal site, by virtue of its
size, and no conflict of the proposal with the Council's roadside tree planing
scheme, I find the erosion of open land and the conflict with the relevant
statutory policies determinant in your clients' appeal which should therefore
be dismissed."
The important point is that even with the difficulties posed by the adoption of
the Local Plan, the contemporary opinions of Mr Unwin and Miss Thomas were that
the prospects of the respondents' appeal succeeding were more than 50%.
Simon Brown LJ in the case of Mount -v- Barker Austin( a firm) [1998] PNLR 493 observed at page 510 F
"If, of course, the solicitors have advised their client with regard to the
merits of his claim or defence, such advice is likely to be highly relevant"
The appellants case that despite the advice the respondents were given at the
time an appeal was being considered, that appeal and indeed an appeal following
a successful challenge to the Local Plan, had no real prospect of success is
not an argument which will readily win the acceptance of the Court. I suspect
that Mr Bowhill appreciated this and consequently based his view on the outcome
of the appeal on his opinion that a challenge to the Local Plan would almost
certainly fail.
The second matter is the continued application of the E1 Policy even were the
Local Plan to be successfully challenged. It is correct that the E1 Policy
would still have had to be considered and applied by a Planning Inspector in an
appeal following a successful challenge to the Local Plan. However the E1
Policy was not as strongly against the respondent's application as was the C1
Policy. It is true that the Inspector would have had to have regard to the E1
Policy and to have made his determination in accordance with it unless material
considerations indicated otherwise. However, the Local Plan Inspector's views
that the application site should be taken out of the Countryside designation
and that development of the site would be appropriate, had a successful
challenge to the Local Plan been mounted would have been at any subsequent
Planning Appeal "a material consideration of substantial weight" See
Ravebuild Ltd -v- Secretary of State for the Environment and the Hammersmith
and Fulham Council (above).
Finally it has to be remembered that the other objections to the respondents'
applications such as the loss of trees objection, the highway objection and the
visual amenity objection had all been overcome as was recorded by Mr Machin in
his decision letter.
In the light of all these circumstances the judge could not have held that
there was no prospect of the hypothetical planning appeal succeeding or that
there was only a negligible prospect of success. The evidence did not compel
the judge to find the chances of an appeal succeeding with the site
undesignated were negligible. The most that Mr Bannister can say, in my
judgment, is that the points he has made to this court indicated that the odds
on such an appeal being successful were against. That was the judge's
conclusion. The judge assessed those odds at 60/40 against. In my opinion
having listened carefully to the submissions of Mr Bannister and Mr Purchas it
cannot be said that the judge's assessment was clearly wrong or indeed wrong at
all. For those reasons I would dismiss this ground of appeal.
The Third Ground of Appeal
I would uphold this ground of appeal.
The judge decided that only £5,000 and not £150,000 should be
deducted from the value of the site when developed as a petrol filling station
in this way:
"Mr Bannister had a final point that since the claim was essentially a loss of
profit claim, the sum paid for the site by MCP should be brought into account
(that was £150,000) which should be deducted from the resulting figure as
well as the £750,000 construction costs. I do not consider that to be
right, partly because £150,000 has in any event been already paid, but
mainly because it is, in my view, irrelevant to bring into account whatever it
was that MCP in fact paid. The correct calculation is the difference between
what the land was in fact worth in 1992 without planning permission, which was
agreed to be £5,000, and what the land would have been worth if it had
planning permission. The figure of £5,000, but no more, thus falls to be
deducted from the calculated figure."
With respect to the judge I disagree. The starting point for calculating the
damages urged upon the judge and accepted by him was the value the land would
have had with planning permission and with a petrol filling station in
operation. Consequently the costs of constructing the filling station had to
be deducted from the figure of £2.3 million, because that was a cost of
developing the site as a filling station. So too was the sum of £150,000
paid by the respondents for the site. That sum had had to be paid in order for
the respondents to acquire the opportunity to develop the site. That sum was
spent before the appellants were instructed.
Had the respondents' claim at trial been (as was originally pleaded) for the
value of the site with planning permission for a petrol filling station
(£1.5 million) less the value of the site without that permission, I would
have agreed with the judge and with the submissions of Mr Purchas. But the
respondents sought more than that. They sought the value of the site after it
had been developed as a petrol filling station. In that case, in my judgment,
all the development costs had to be brought into account in determining the
true amount of that loss. This means that the damages become 40% of the
difference between £2,322,036 and £900,000 namely £568.814.40
Consequently I would reduce the damages awarded, namely the sum of
£626,814.40 by the sum of £58,000 and to that extent I would allow
this appeal. It will be necessary for the interest on the damages to be
recalculated.
LORD JUSTICE WARD: I agree
MR JUSTICE GAGE: I also agree
Order: Appeal allowed on third ground. Respondents to repay to
Appellants £92,046.17, to carry interest at the judgment rate of
£20.17 per day; Respondents to recover 4/5th of their costs of
appeal, to be taxed if not agreed. Leave to appeal refused to both parties.
(Order does not form part of the approved judgment)
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