Loss must be proved in negligence cases

A spotlight was shone on the basic legal principle of ‘causation’ in a recent case heard in the Court of Appeal which centred on a firm of solicitors which had failed to provide its client with proper advice about planning permission. The case also underlined that new evidence cannot be introduced into an appeal hearing if it was, or should have been, known about at the time of the original trial.The claimant in the appeal ran a truck-stop business which provided parking and a restaurant for drivers of heavy goods vehicles. In 2005 it sold the site to a developer for £6.2 million. This resulted in a large capital gain, on which the claimant wanted to avoid paying tax by obtaining roll-over relief. This meant it had to continue its business on an alternative site.

The claimant agreed to buy a new site, ‘Packhorse Place’ and paid a deposit, against its solicitor’s advice and before the solicitor had started to investigate title. As the purchase progressed, the solicitor failed to advise its client that there were planning permission issues on the site and that no permission existed for parking heavy goods vehicles.

On completion of the purchase the claimant ran its business on the new site for long enough to secure roll-over relief, but then ran into difficulties with the planning authorities. It was obliged to stop using the parking area and the business subsequently went into liquidation.

At the first trial, the claimant argued that it would not have gone ahead with the purchase of ‘Packhorse Place’ if its solicitor had warned it about the problems with planning permission. The judge accepted that the solicitor had been negligent, but rejected the claimant’s claim and gave five reasons for his conclusion that the claimant was already too committed to the purchase to back out by the time the defendant ought to have warned it of the planning difficulties. As a result the claimant had not proved that it had suffered a loss as a result of the negligence, so the claim failed on grounds of causation.

In the appeal the claimant argued that the first trial judge’s decision on causation had been wrong. It said that he had failed to consider the impact of the claimant’s banking relationship and its financial position. In essence, it argued that its bank would not have been prepared to lend it the money to buy Packhorse Place had it been aware of the issues with planning permission. The court refused to accept new evidence about the claimant’s banking relationship and financial position as it said it should have been available at the first trial. It then refused the appeal on the grounds that the first judge’s five reasons for rejecting the claim on causation grounds remained compelling.

“The legal concept of causation can be a useful defence for professional firms accused of negligence,” said James Burgoyne, Director – Claims & Technical, Brunel Professional Risks. “If their client cannot prove that they suffered a loss as a result of poor advice, then there is no grounds for making a claim for compensation – even if the negligence is accepted by both parties.”

Further details of the case, AW Group Limited v Taylor Walton, has been published by law firm DWF.