Claim for consequential loss allowed in claim for negligence against surveying firm

26/02/2010

The defendant was a licensed conveyancing firm which had acted for the Claimant in a property transaction. Joyce had purchased a property that had been advertised for sale with a buyer's option to purchase some additional land to the rear of the property if the vendor of the property was unable to obtain planning permission for the construction of a dwelling house on the additional land.

In fact the option contained in the conveyance of the property was a seller's option and not a buyer's option.

In due course the vendor refused to sell the additional land to Joyce and Joyce contended that he was entitled to loss of profit that he would have made, had he been able to redevelop the property and the additional land together, by building a large new detached house.

The firm admitted negligence and Joyce claimed £620,000.

It was held by Mr Justice Vos that Joyce was entitled to recover consequential losses based on the profit that he would have made had he been able to build the new property (Hadley v. Baxendale and Victoria Laundry (Windsor) v. Newman Industries followed).

Joyce could only recover the damages that he sought under the second rule in Hadley namely that damages for breach of contract were such as might reasonably have been in the contemplation of the parties at the time they made the contract.

The firm knew that Joyce intended to purchase the property to make a profit from developing the property and that the additional land was to play a role in the development and that knowledge was sufficient to give the firm the knowledge of special circumstances outside the "ordinary course of things" of such a kind that a breach in those special circumstances would be liable to cause Joyce loss.

The court heard expert evidence on the prospect sof planning permission being given and held that if the firm had properly advised Joyce there was an 85 per cent chance that Joyce would have been granted a buyer's option of the type that he sought and if he had gotten that option he would have exercised it.

Further, Joyce would have had a 40 per cent chance of getting planning permission for the largest development of the property that required the use of the additional land. However, it was clear that Joyce could have redeveloped the property for profit without the additional land but had failed to do so.

Finally, Joyce had an 85 per cent chance of obtaining sufficient funding of the development.

Having regard to the overlap of all the chances the likelihood of Joyce securing the fullest development of the property was 29 per cent (Allied Maples Group Ltd v. Simmons & Simmons considered).

Joyce adduced evidence that he would have made a profit of £375,000 if the property had been fully developed and a profit of £245,000 through a lesser development that did not require the use of the additional land. Accordingly, the maximum lost profit to Joyce was £130,000.

Taking into account the 29 per cent chance, Joyce was entitled to damages to the amount £37,700, and that sum conformed with the fundamental principle of putting Joyce in the position he would have been in, had he not sustained the wrong or had the contract been performed by the firm, and the buyer's option had been granted to him.

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