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OUTER HOUSE, COURT OF SESSION
[2008] CSOH 23
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CA3/06
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OPINION OF LORD DRUMMOND YOUNG
in the cause
PREFERRED MORTGAGES
LTD
Pursuers;
against
(FIRST) ROBERT
THOMSON SHANKS; (SECOND) MARK ROBERT SHANKS; and (THIRD) ANDREW F. DEWAR
Defenders:
________________
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Act: McIlvride; Anderson Fyfe LLP
Alt: Haldane; Brechin Tindal Oatts
7 February
2008
[1] The
pursuers provide secured loans for the purchase of heritable property. In 2001 they advanced funds to enable three
individuals to purchase a housing development at Hurlet
Hill Court, Barrhead Road,
Glasgow.
Before advancing funds the pursuers obtained a valuation of the
development from Robert Thomson Shanks, the first defender, who
practised as a chartered surveyor. The
second defender was brought into the action on the basis that he was the first
defender's partner at the material time, but that contention turned out to be
incorrect and the pursuers ultimately accepted that only the first defender
acted as a surveyor at the time of the transaction; on 10 July 2007 the
second defender was assoilzied from the conclusions of the summons. The third defender is a solicitor, and it is
a matter of agreement that he acted for the pursuers in the lending transaction
with which the present action is concerned.
[2] The
borrowers defaulted in payment, and thereafter the pursuers raised the present
action, in which they have alleged that the first and third defenders were both
liable to them for breach of contract and professional negligence. In the summons the pursuers concluded for two distinct
sums, which amounted in total to £501,820.81.
The first conclusion was framed against the defenders jointly and
severally and was for payment of the sum of £316,000 with interest. The second conclusion was against the
present third defender alone and was for payment of the sum of £185,820.81.
[3] Following
sundry procedure, the pursuers settled their claim against the first defender
(the second defender having already been released from the action) in return
for payment of the sum of £50,000; the result was that on 12 September 2007 the first defender was
assoilzied from the conclusions of the summons.
Thereafter the action proceeded against the third defender alone. The pleadings were adjusted further to take
account of the settlement with the first defender. In the amended summons the pursuer concludes
for payment of the sum of £451,820.81; it is a matter of agreement that that
amount represents the original sum sued for, £501,820.81, less the £50,000 paid
by the first defender. In addition to
that sum the pursuers conclude for interest on the sum of £50,000 at the London
Inter Bank Offer Rate ("LIBOR") from 9 November 2005, the date when the
pursuers' loss was calculated, until 12 September 2007, the date when the
settlement with the first defender was effected.
[4] The pursuers' detailed averments regarding the transaction are
as follows. In June 2001 three named
individuals, John Jackson, Wendy Jackson and James Jackson,
approached the pursuers for funding for the purchase of 12 flats at Hurlet
Hill Court.
The borrowers proposed to buy the properties from the then owner, WJ
Jackson Construction Ltd, and thereafter to let the properties to tenants. The development had been constructed by WJ
Jackson Construction Ltd. The pursuers
agreed in principle to lend funds to the borrowers. That agreement was conditional on the
borrowers' providing the pursuers with valid and enforceable standard
securities over the properties and on the pursuers' being satisfied that the
value of properties provided sufficient security for the repayment of the sums
to be advanced. The proposed loans were
to be made on a "non status" basis; that indicates a loan made by a lender in
reliance on the value of heritable security without inquiry into the value of
the borrower's personal covenant to repay.
[5] The pursuers obtained a valuation of the properties from the
first defender, who was also asked to report on their condition. The first defender advised the pursuers that
the aggregate open market value of the properties was £1,240,000. The pursuers aver that the value of the
properties was materially overstated in the first defender's reports and
valuations. In reliance on those reports
and valuations the pursuers agreed to lend a total of £935,942 to the
borrowers. That agreement, it is said,
was conditional on the pursuers' being provided with valid and enforceable
securities over the properties,
[6] The third defender acted as solicitor for the borrowers in the
purchase of properties. By letters dated
3 July 2001 the
pursuers instructed him to act on their behalf in the constitution of the
proposed standard securities over the 12 properties. The pursuers aver that with their letters of
instruction the pursuers enclosed a copy of their "Instructions to solicitors". These required the solicitor to contact the
pursuers if there were any defects in the title which adversely affected their
position; they also required that, if the property were less than 10 years
old, the solicitor should obtain either appropriate NHBC documentation or an
appropriate architect's certificate. The
pursuers aver that on 4 July 2001
the third defender provided the pursuers with a written report on title on each
property. In each report the third
defender confirmed that the pursuers would at settlement have a good, valid and
marketable title to each property. On
the following day, 5 July, the third defender advised the pursuers that he
held 12 standard securities executed by the borrowers and that he had had
sight of a suitable architect's certificate relating to the development. In fact the relevant architect's certificate
bore to have been issued for the benefit of the company which carried out the
development, WJ Jackson Construction Ltd, and Northern Rock PLC. The third defender had stated to the
solicitors acting for WJ Jackson Construction Ltd, Messrs Dallas McMillan, that
he required an amended certificate addressed to the pursuers, but no further
architect's certificate was ever provided by Dallas McMillan. No architect's certificate was exhibited by
the third defender to the pursuers.
Nevertheless, in reliance on the third defender's reports on title and
written confirmation dated 5 July
2001, the pursuers on 9 July
2001 advanced the loans to the borrowers, making payment to the
third defender's client account.
[7] The pursuers aver that the borrowers subsequently defaulted in
payment. The pursuers then called up
their standard securities. When they
took possession of the properties they discovered that the development had
never been completed. In particular, the
sanitary and other fittings in the properties had not been fully installed; the
garages for eight of the properties had not had their doors fitted; the boundary
fence around the development had not been completed; nor had the landscaping of
the common ground surrounding the properties.
The roads and footpaths within the development had not been fully
dressed, and the road providing access to the development from the public road
had not been completed. That road was
being constructed on a route required to conform to the planning permission
granted by the local authority. The land
on which that road was to be constructed, however, was not owned by the borrowers,
and the borrowers had no servitude right of access over the route. Nor did the borrowers own any land over which
access could be provided to the development conform to the conditions of the
planning permission. I was informed, and
I do not understand the matter to be in dispute, that the particular problem
was that the local authority required a bell mouth to the access road and the
borrowers did not own the land required to configure the access in that
way. In addition, the pursuers aver
that, although the properties were less than 10 years old, there was no
NHBC documentation; moreover, the third defender had not obtained an architect's
certificate relating to the properties.
[8]
The pursuers' case against the first defender was framed in both contract and delict;
the pursuers averred that the first defender knew that the pursuers intended to
rely on the value and marketability of the properties to ensure repayment of
the proposed loans in the event of default, and knew that the pursuers would rely
on his valuation in that respect. The
first defender had overvalued the properties; he gave advice that the aggregate
open market value of the properties was £1,240,000, whereas, it is averred, the
true aggregate open market value at the material time was £924,000. In addition, the first defender failed to
advise the pursuers that the installation of internal fittings and garage doors
had not been completed and that there were problems with the formation of roadways
and the common ground around the development.
[9] The
pursuers' case against the third defender is likewise framed in both contract
and delict. It is averred that the third
defender was under a duty to investigate the title to the properties in
accordance with current best conveyancing practice and to do everything that a
competent solicitor would regard as necessary to report on the title to the
pursuers. It was further the third
defender's duty to deal with any other matters relevant to the transaction in
accordance with best conveyancing practice; in particular it was his duty to
advise if there were any defects in the title which adversely affected the
pursuers' position or any planning notices or orders which adversely affected
the marketability of the properties. It
is averred in particular that it was the third defender's duty to advise the
pursuers that planning permission for the development was conditional on an
access road over ground not owned by the borrowers and over which there was no
servitude right of access. It was further
the third defender's duty to advise the pursuers that neither appropriate NHBC
documentation nor an architect's certificate relating to the properties was
available.
[10] The pursuers aver that as a result of the third defender's
breach of contract and fault they suffered loss. If they had been advised about the lack of an
architect's certificate or the problems with the right of access, the pursuers
would not have lent funds to the borrowers; it was in reliance on the third
defender's advice that the pursuers made the loans to the borrowers. The borrowers defaulted, and the pursuers
called up their standard securities and in February 2003 sought to exercise
their power of sale. They then
discovered that all but two of the ten properties were occupied by
tenants, and they were compelled to raise summary cause proceedings to eject
the tenants. At this point the pursuers
experienced difficulty in selling the properties as a result of the borrowers'
failure to complete the construction works and the absence of any vehicular
right of access over the access route specified in the planning
permission. The properties were
ultimately sold to a single purchaser for a total price of £600,000 in March
and April 2004. Following the sale, it
is averred, the total loss sustained by the pursuers as at 9 November 2005 amounted to
£501,820.81. In addition the pursuers
remained liable for interest on the outstanding balance of the sums borrowed by
them to provide the advance, at the London Inter Bank Offer Rate.
[11] Of the total loss claimed by the pursuers of £501,820.81,
£50,000 has been recovered from the first defender, and the pursuers seeks to
recover the balance of £451,820.81 from the third defender, together with
interest on the sum recovered from the first defender. Counsel for the third defender challenged the
pursuers' right to claim the whole of that sum from the third defender. At debate, she invited me to sustain the
third defender's pleas to the relevancy and competency of the pursuers' case
and to dismiss the action. She submitted
that the pursuers' case was predicated on the proposition that, having
recovered £50,000 from the first defender, they were entitled to recover the
whole of the rest of that loss from the third defender. That clearly assumed joint and several
liability as between the first and third defenders; it was only on that basis
that the third defender could be liable for the balance of the total loss
sustained by the pursuers. That meant,
however, that the pursuers were claiming to recover from the third defender
losses attributable to the first defender's negligent overvaluation of the
subjects.
[12] I agree that the pursuers' case is predicated upon joint and
several liability as between the first defender and the third defender. The history of the calculation of the claim
is set out in the pleadings, and it is clear that the sum now claimed from the
third defender represents the balance of the total loss sustained by the
pursuers less the £50,000 recovered from the first defender; such a claim must
be based on joint and several liability. The initial question that arises is whether
such a claim can properly be made in the circumstances of the present
case. I think that strictly speaking
this is an issue of relevancy rather than competency; the joint and several
conclusion has disappeared from the pleadings, and what is in issue is the
legal basis for the pursuers' claim rather than the competency of the
remedy. Nevertheless, the relevant
principles are those that would apply in a debate on competency.
[13] The competency of a joint and several claim has been considered
in a number of cases. In Barr v Neilsons, 1868, 6 M 651, and Hook
v McCallum, 1905, 7 F 528, it was
held that it was incompetent to raise a joint and several conclusion against
two individuals for separate slanders uttered by each, in the absence of
any averment of conspiracy between the two.
These decisions clearly proceed on the basis that each slander is a
distinct wrong, and the loss caused by each is distinct; a pursuer cannot
proceed on the basis of joint and several liability against two defenders
for two separate and unconnected wrongs.
In Belmont Laundry Co Ltd v Aberdeen Steam Laundry Co Ltd, 1898, 1
F 45, the pursuers raised an action against a former employee on the ground
that he had left the pursuers' service in breach of the contract between them,
and against the employee's new employer on the basis that it had induced him to
do so, in the knowledge of the contract with the pursuers. It was held that a joint and several
conclusion was competent. Lord Adam
stated (at 1 F 47):
"No doubt the
ground of action against each defender is different -- that against Innes being
breach of contract, and that against the Aberdeen Steam Laundry Company the
doing of a wrongous and illegal act -- but they both contributed to produce the
one wrong of which the pursuers complain, and therefore I think that they are
conjunctly and severally liable in the consequences".
The critical point seems to be that
the pursuers complained of a single loss, namely the loss of the employee's
services, which was caused by the separate acts of both defenders. In subsequent cases this feature, generally
described as a "single wrong", has been treated as the criterion for
distinguishing when a joint and several conclusion is competent.
[14] In Grunwald v Hughes, 1965 SLT 209, the pursuers had
employed an architect to design and supervise structural alterations to the
premises in which they carried on a restaurant business. In the course of the works a boiler was
installed by heating and ventilation engineers.
When it began operation, the pursuers noticed that the floor tiles under
the boiler were being deformed and coming close to the burner tubes. They pointed this out to the architect, who
stated that there was no danger. He did
not inform the heating engineers.
Thereafter a fire broke out in the area under the boiler, causing
substantial damage to the premises. The
pursuers sued the architect and heating engineers jointly and severally. It was held that this form of conclusion was
competent. Lord Justice-Clerk Grant
stated (at 211-212):
"In an action
based on delict it is commonplace to have a joint and several conclusion
against two delinquents who have both contributed to the single wrong which the
pursuer has suffered....It seems to me that the test which has been, and should
be applied is the same whether the action be based on delict or on breach of
contract. That test is whether the two defenders
have contributed, albeit in different ways, to cause a single wrong.
... In the
present case the pursuers aver a single wrong, the setting on fire of their
premises, to which, they say each defender, by his breach of contract
contributed".
In the same case Lord Strachan
stated (at 214):
"In the present
case the one wrong of which the pursuers complain is the fire and its
consequent damage and the pursuers have averred that each defender caused the
fire by their breach of contract. In
those circumstances... I am of opinion that the action is competent".
Lord Walker stated (at 215):
"I can see no
reason in principle why two defenders should not be jointly and severally
liable for their separate breaches of contract, provided always that each
breach was a material cause of the whole damage".
In all these opinions it seems
clear that the crucial issue is whether the actings of each defender
contributed to a single loss sustained by the pursuer. For this purpose the precise nature of the
legal liability of each defender does not matter, provided that the actings of
each defender contributed to the single loss.
[15] A similar approach was followed in the subsequent cases of McGillivray v Davidson, 1991 SLT 693, and
Yoker Housing Association Ltd v McGurn Logan Duncan & Opfer 1998
SLT 1334. In relation to the second of
these cases counsel for the third defender submitted that it was significant
that the architects and structural engineers, who had been sued jointly and
severally, formed part of the design team engaged by the pursuers for a rehabilitation
project. While it is true that both
defenders formed part of the design team, it seems to me that the critical part
of Lord MacLean's reasoning is found at page 1339, where, after referring
to the existence of a design team, he stated:
"Of course,
their alleged failures are different, but in a material respect their failures
jointly contributed to substantial losses".
[16] It is accordingly essential to identify the loss on account of
which the pursuers have raised proceedings against each of the defenders. In so far as it affects both the first and
third defenders, this can be seen most clearly from the original summons. In the summons the pursuers sued for a total
loss of £501,820.81, which represented the difference between the amount due to
them by the borrowers and the amount that they actually realized through the
sale of the properties. That amount is
divided between the two defenders on the basis that the first defender is
only liable for the consequences of providing wrong information whereas the
third defender is liable for giving negligent advice; I will return to this
distinction again at paragraph [19] below.
Because the first defender was liable for providing incorrect
information, he is responsible only for the consequences of the information's
being wrong. In the present case, the
first defender stated that the open market value of the properties was
£1,240,000, whereas their true open market value at the time of the valuation
was £924,000. That meant that the
pursuers had £316,000 less security as a result of the incorrect
valuation. That set a limit to the first
defender's liability, and that limit was reflected in the sum that was claimed
against the first defender. The third
defender, by contrast, was liable for giving incorrect advice. If incorrect advice is given the defender is
responsible for all the foreseeable loss which is a consequence of the course
of action that he advises. Consequently
the third defender was liable for the whole of the pursuers' loss, and his
liability was not restricted in the same way as the first defender's
liability. That is why the original
conclusions were for payment of £316,000 from the defenders jointly and
severally and the balance of the pursuers' loss, £185,820.81, from the third defender
alone. In my opinion that approach to
the loss sustained by the pursuers indicates that it is a single loss that is
claimed from both defenders, namely the difference between the amount due by
the borrowers and the amount realized from the heritable security. The total sum is broken down in the manner
that I have explained, but that is done for reasons that have nothing to do
with the existence of joint and several liability; it merely reflects the
limitation on the first defender's liability.
[17] It follows that the present case is one in which both defenders
were originally sued for a single loss, even though the extent of joint and
several liability was restricted by the limitation on the first defender's
liability. Such a claim is not in my
opinion distinguishable from cases such as
Grunwald v Hughes, supra. The joint and several conclusion was
accordingly competent, and the third defender's challenge to the pursuers'
reliance on joint and several liability must fail. I should add that authority for restricting a
joint and several conclusion because of a financial limit that applies to one
of the defenders is found in Duthie v Caledonian Railway Co, 1898, 25 R.
934. In that case the liability of the
first defenders was restricted in amount under the Employers Liability Act but
the second defenders' liability, which was at common law, was
unrestricted. The court ultimately
granted decree against both defenders jointly and severally to the extent of
the first defenders' liability under the Act and against the second defenders
for the balance of the sum due to the pursuer.
That is what the pursuers sought to do in the present case, although the
limitation on the first defender's liability arose from the nature of his duty
rather than any statutory limitation.
[18] The second argument advanced by counsel for the third defender
was that the pursuers' averments of loss were irrelevant. The correct approach, she submitted, was to
consider the scope of the duty of care of each defender, and to determine the
loss that was attributable to each defender's breach of his duty of care. It was not appropriate to attribute the whole
of the pursuers' loss to the third defender, subject only to partial concurrent
liability of the first defender. The
pursuers had failed to make averments of the losses that flowed specifically
from the third defender's negligence, or at least failed to give adequate
specification of such averments. In
order to deal with this argument it is necessary to consider the precise nature
of the third defender's liability to the pursuers and the consequences that
that has for the extent of the pursuers' loss for which the third defender may
be responsible.
[19] In South
Australia
Asset Management Corporation v York
Montague Ltd, [1997] AC 191, the House of Lords considered the liability of
a surveyor for a negligent valuation. In
that case Lord Hoffmann, who delivered the principal speech, stated (at 214):
"[T]he
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. A duty of care which imposes upon the
informant responsibility for losses which would have occurred even if the
information which he gave had been correct is not in my view fair and
reasonable as between the parties. It is
therefore inappropriate either as an implied term of a contract or as a tortious
duty arising from the relationship between them.
The principle
thus stated distinguishes between a duty to
provide information for the purpose of enabling someone else to decide upon
a course of action and a duty to advise
someone as to what course of action he should take. If the duty is to advise whether or not a
course of action should be taken, the adviser must take reasonable care to
consider all the potential consequences of that course of action. If he is negligent, he will therefore be
responsible for all the foreseeable loss which is a consequence of that course
of action having been taken. If his duty
is only to supply information, he must take reasonable care to ensure that
information is correct and, if he is negligent, will be responsible for all the
foreseeable consequences of the information being wrong".
A distinction is thus drawn between
the mere provision of information for use in making a decision about a
transaction and providing advice about such a decision. In the former case, the liability of the
person providing the information is limited to the consequences of the
provision of wrong information; in the latter it is not so limited, but extends
to all foreseeable loss that results from the course of action that has been
advised.
[20] South Australia Asset
Management Corporation v York
Montague Ltd was concerned with advice given by valuers to lenders, but in
subsequent cases the position of solicitors who act for lenders has been
considered. In Bristol
& West Building Society v Rollo Steven & Bond, 1998 SLT 9, a firm of solicitors had
acted for a building society in connection with a loan transaction. It was a term of the solicitors' instructions
that the building society should be able to obtain vacant possession in the
event of default. The loan was advanced
in reliance on the solicitors' report.
Thereafter the borrower defaulted, and it was discovered that there was
a sitting tenant in the house, which had the effect of reducing the sale
price. The building society sued the
solicitors for damages, including the difference between the sum advanced by
them to the borrower and the sum received when the house was sold. Lord MacLean stated (at 1998 SLT 11):
"The critical
fact which the pursuers offer to prove is that, if they had been provided with
an accurate report on title and if they had been informed that there was a
sitting tenant with security of tenure, they would not have made any advance to
the borrower... It must, therefore, be
clearly understood and appreciated from the outset that this is not a case
where a professional adviser, such as a surveyor, has provided a valuation
report on property which, it is said, was seriously and negligently deficient,
resulting in loss to the person relying upon its terms".
After considering South Australia Asset Management
Corporation v York Montague Ltd,
Lord MacLean continued:
"Counsel for
the pursuers submitted that the defenders as solicitors were not merely
providing information to the pursuers.
They were, he said, policing the transaction by assuring the pursuers
that all the conditions of loan were met.
I have reached
the conclusion that counsel for the pursuers is correct in his analysis.... When [the solicitors] were instructed by the
pursuers to ensure that the transaction accorded with the conditions of the
offer to advance, and to ensure that the borrower was obtaining full vacant
possession of the property, they must have known that, as a result of their
report, the pursuers would immediately release the loan funds to the
borrower. This, as it seems to me, was
not simply providing advice: it was, in effect, advising the pursuers to take a
certain course of action, namely to lend a certain sum to the borrower on the
security of the property. There were no
other factors or variables at that stage for the pursuers to consider".
A broadly similar approach was
followed by Lady Paton in Leeds &
Holbeck Building Society v Alex
Morison & Co, 2001 SCLR 41, at paragraphs [45]-[48], and by Lord Reed
in Newcastle Building Society v Paterson Robertson and Graham, 2001 SC
734, at paragraphs [13] and [14]; in the latter paragraph Lord Reed stated:
"It is of
course true that the risk of default is inherent in any loan transaction; but
the critical factors in the present case are that the purpose of the report
(unlike a valuation, in most cases) may be not merely to enable the lender to
decide how much to lend, but to decide whether to lend at all; and insofar as
any inference can be drawn from the pleadings, the report may have been
relevant to the lender's assessment of the risk of default".
[21] In the present case the pursuers make the averments of fault
and loss set out at paragraphs [9] and [10] above. In summary, it is said that the third
defender failed to advise the pursuers that the access specified in the
planning permission required use of land which was not owned by the borrowers
and over which there was no servitude right of access; further, the third
defender failed to advise that no architect's certificate was available. If the pursuers had been advised of those
facts, they would not have lent the funds to the borrowers. In my opinion those averments are sufficient
to indicate that the third defender was providing advice to the pursuers and
not merely information. The third
defender's responsibility as solicitor acting for a lender on heritable
security was to confirm that the title of the security subjects was adequate;
for obvious reasons the adequacy of the title included the availability of
necessary rights of access. The third
defender's responsibility as solicitor for a lender also included ensuring that
the documentation relating to the construction of the development was in order
and confirming that fact to the lenders; once again, that is a very obvious
responsibility in the case of a newly built property. It is averred that the pursuers would not
have proceeded with the loan if they had been advised of the correct position. In view of the fundamental importance of
proper title and ensuring that construction has been duly completed that
averment is understandable. Moreover,
the pursuers aver that the loan was a "non-status" loan, in that the pursuers
relied entirely on the heritable security to ensure repayment, without regard
to the borrowers' personal resources; that suggests that it was particularly
important to ensure that the security was fully effective. In these circumstances the pursuers' case is
that the third defender provided incorrect advice about two critical aspects of
the transaction. That case is in my view
properly characterized as an advice case.
The result is that the third defender is potentially liable for the
whole of the foreseeable losses that are a consequence of the advice given by
him. I should point out that in this
respect the present case is very close to the circumstances considered by Lord
MacLean in Bristol & West Building
Society v Rollo Steven & Bond,
and the result is in my opinion the same.
[22] In the course of argument counsel for the third defender
submitted that a solicitor's liability should be restricted to the losses that
fall within the scope of the duty of care owed by the solicitor. No doubt that is true, but the important
point is that the solicitor will normally advise a lender that the proposed
security is good. In those circumstances
the solicitor's advice is critical to the transaction, and it will be obvious
that the transaction will not proceed unless matters such as title and
completion are properly established. In
those circumstances the solicitor's advice is responsible for the very fact
that the transaction goes ahead. That is
the basis on which the solicitor may be liable for the whole of the losses that
result from the transaction.
[23] Nor can it be said that there is any contradiction between the
pursuers' averment that they would not have proceeded with the loan transaction
had they received accurate advice from the third defender and their averments
in the original version of the summons that they would not have proceeded with
the loan transaction had they received an accurate valuation from the first
defender. All that this involves is an
assertion that the pursuers would not have lent funds to the borrowers if they
had known the true value of the security subjects or if they had realized that
there were problems about the title to the security subjects and their
completion; in other words, the value of the subjects, title to the subjects
and the state of completion of the subjects were all critical to the decision
to lend.
[24] One factual situation that was discussed during the course of
argument was a case where land that was essential for access was missing but,
when the problem was discovered, the lender was able to obtain the necessary
land for a relatively small sum. In such
a case the same general principle applies: the solicitor is responsible for all
of the foreseeable losses that are a consequence of the negligent advice given
by him. The difference is that those
losses are mitigated through the acquisition of the necessary land. Consequently the solicitor's liability would
be limited to the cost of the additional land, the legal and other expenses of
acquiring it, and any consequential losses that resulted from the delay in
obtaining satisfactory access. If the
land is not acquired an argument based on mitigation will be available to the
solicitor. In the present case, the
pursuers have made fairly elaborate averments about the steps that they took to
sell the properties after the borrowers defaulted. They aver that they took advice from a firm
of chartered surveyors known as Barr Brady, and the details of the transaction
that was ultimately concluded with a purchaser are set out. Nevertheless, if the third defender thought
that the price obtained was inadequate, he would be entitled to plead a failure
to mitigate. A further possibility is that the third defender might wish to
challenge the adequacy of the sum paid in settlement by the first
defender. In that event there is nothing
to prevent the third defender from bringing the first defender into the action
as a third party.
[25] Finally, counsel for the third defender submitted that the
pursuers did not give fair notice of the way in which the claim against the
third defender was calculated; in particular it was not clear how the original
claim, which involved joint and several liability to the extent of £316,000,
came to be converted into a claim in which the whole of the pursuers' loss,
apart from the £50,000 paid by the first defender, was sought from the third
defender. The answer to this argument is
found in my opinion in the proper analysis of the third defender's liability,
and in particular the fact that that liability is based on negligent advice
rather than negligent information. On
that basis the third defender is potentially liable for the whole of the
pursuers' loss in entering into the loan transaction. As to the details of that loss, I am of
opinion that adequate specification is given.
In any event, in the commercial court it is not usual to advance
arguments based on specification at debate; questions of specification should
be raised in the course of preliminary or procedural hearings and decided at
that stage.
[26] In the foregoing circumstances I am of opinion that the
pursuers have set out a relevant case of breach of contract and negligence, and
have relevantly averred the losses flowing from such breach of contract or
negligence. I will accordingly refuse
the third defender's motion for dismissal of the action, and I will repel the
third defender's fourth plea in law, which is to the competency of the
action. Quoad ultra I will allow a proof before answer, reserving the
parties' remaining pleas in law.
