Dixon v Clement Jones
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE RIX,LORD JUSTICE CARNWATH,LORD SLYNN |
| Judgment Date | 08 July 2004 |
| Neutral Citation | [2004] EWCA Civ 1005 |
| Docket Number | A2/2004/0577 |
| Court | Court of Appeal (Civil Division) |
| Date | 08 July 2004 |
[2004] EWCA Civ 1005
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
(MR JUSTICE PENRY-DAVEY)
Royal Courts of Justice
Strand
London, WC2
Lord Justice Rix
Lord Justice Carnwath
Lord Slynn of Hadley
A2/2004/0577
MR SIMON MONTY QC (instructed by MSSRS JAMES CHAPMAN & CO SOLICITORS, MANCHESTER) appeared on behalf of the Appellants
MR CHARLES DOUTHWAITE (instructed by MESSRS GEORGE IDE, PHILLIPS SOLICITORS, CHICHESTER) appeared on behalf of the Respondent
This appeal arises out of the acknowledged negligence of a firm of solicitors, Clement Jones Solicitors, in allowing a claim to be lost through its being struck out for failure to serve a statement of claim. The underlying claim was for professional negligence against a firm of accountants known as The Dyer Partnership for failing to advise the claimant, Mrs Patricia Dixon, properly on a business transaction.
The question which the judge at trial had to determine was whether Mrs Dixon had lost anything of value in being deprived of the chance to take that underlying claim forward to judgment or settlement. The judge found that the struck out claim was of some value. He found that Mrs Dixon had a potentially valuable claim against the firm of accountants, which he assessed at 30 per cent. It is at any rate now common ground that the accountants were negligent in failing to warn Mrs Dixon explicitly of the dangers inherent in the viability of the projected figures for her business venture and of risking her home as security for the borrowings necessary to start up that venture. Nevertheless, the judge assessed the value of the lost claim at only 30 per cent because he felt that Mrs Dixon was, on balance, likely to have pressed ahead despite receiving the warnings which she should have got, but did not in fact receive.
In those circumstances the solicitors, now appellants, say that the judge below, Penry-Davey J, was obliged to have dismissed Mrs Dixon's claim against the solicitors or should have assessed its value as negligible and certainly at less than 30 per cent.
The essential facts of the claim were that Mrs Dixon had for a long time been contemplating that a position which was subsequently developed and became known as Moggy's at 12 Crundles, Moggs Head, Herne Farm Estate, Petersfield in Hampshire would make a good convenience store. She pursued this idea in partnership with a friend, Mr Mooney.
The prospect of development became a live one in 1990 and she obtained an option of first refusal from the developers. Armed with this Mr Mooney approached his bank, Barclays, for a loan. On 20th November 1990 Barclays wrote to Mr Mooney. In a reply full of kindness and sound advice, but on the instant request negative, the bank declined the loan and concluded as follows:
"To finance the purchase, shop fitting and initial stocking would require a lending of between £170,000 and £200,000 and to lend such a sum solely because adequate security is available would be little better than pawn broking. To put at risk everything that you and Mrs Dixon have accumulated over the past 40 years is an undertaking which, I regret, does not fall within the parameters of an acceptable banking proposition and I am afraid that the bank cannot support you in this venture.
I know that this decision will be a disappointment to you but I really must ask you to stand back from the proposition and re-examine the risks and potential benefits. I have no doubt that you could obtain sufficient commercial finance to enable you to proceed if you are determined to do so but I hope you will consider my comments in the constructive manner intended."
As a result of receiving that letter on 21st November 1990 Mrs Dixon wrote to Mrs Dyer of The Dyer Partnership asking for her advice as to the best place to approach for funds, but also adding:
"We calculated that we should need a total of approximately £170,000 to set up and get started, with possibly a further sum on overdraft of up to £10,000 for setting up stock. We are now re-assessing our financial plans … Finally, perhaps you would be kind enough to look at our figures more deeply and re-assess our ideas, as we now feel a little unsure of ourselves without professional advice."
Passing over his detailed findings of fact, about which I shall say a little further below, I go straightway to the judge's essential conclusions towards the end of his judgment. At paragraph 41 he said this:
"In my judgment because of her eagerness to proceed with the venture, the claimant was not only willing to take on the National Home Loans loan but also to provide security by way of her house, and her eagerness was such that the risks of proceeding, which had been clearly spelt out in the Barclays letter, were put to the back of her mind and not allowed to stand in the way of a venture which she was determined to pursue. However, she maintains her complaint that she was never warned that the projected turnover was unrealistic or that the project was financially doomed."
The judge then considered the three ways in which a case of negligence was put against the accountants. He said that the first way of putting Mrs Dixon's case regarding her lost claim alleged a failure by the accountants properly to advise regarding all aspects of the business transaction, including advising on whether it was sensible to proceed with the purchase and business proposition. On that limb the judge essentially found that there was a realistic claim in negligence against the accountants. He put it in this way at the end of paragraph 43:
"…it was the duty of Dyer to warn emphatically and again of the risks, either in a meeting or in writing. They did not do so. However, in view of the claimant's determination to go ahead despite the Barclays letter, I do not feel able to conclude that she would necessarily have accepted the advice and although I do not exclude the possibility that she might have done so, it is in my judgment more likely having regard to her determination to go through with the project that she would have rejected the warning and in the event that she was able to obtain the necessary finance, would have gone ahead."
The judge next considered two other ways in which the claim of negligence would have been put against the accountants, but rejected both of them as wholly unsubstantiated. The first of those two further cases was to the effect that Mrs Dixon had been positively persuaded to mortgage her unencumbered home by the accountants on the basis that the business proposition was viable and that the house would not be at risk. The third way in which she would have put her case alleged that the accountants had given positive advice to take out the National Home Loans loan secured on Mrs Dixon's home. As I said the judge rejected both those second and third limbs of the claim as entirely unsubstantiated. He then concluded in these paragraphs:
"47. In the light of those findings, I have to consider whether as a result of her claim against Dyer being struck out the claimant has lost something which had a real and substantial value rather than a merely negligible prospect of success. In relation to that the evidential burden rests on the negligent defendant, to prove that she has not. In my judgment on the limited basis which I have set out, the claimant has lost something of real and substantial value, and the defendant has failed to prove that the overall value of the claim was negligible. However, because of the limited basis on which the claim might have succeeded, and having regard to the likelihood that even with the benefit of warnings and advice that were not given by Dyer the claimant would have proceeded with the venture in any event, I assess the prospects of success had the original litigation been fought out at 30%. In arriving at that figure, I have borne in mind the principle in Armory v Delamirie (1722) 1 Str 505 and encouragement to assess the prospects generously given that it was the defendant's negligence which deprived the claimant of the chance of succeeding in greater measure.
48. Submissions have been addressed to me on behalf of the defendant following on the decision of the Court of Appeal in Galoo -v- Bright Grahame Murray (1994) 1 WLR 1360. It is submitted that the cause of the business collapsing was the inability to meet turnover figures and that Dyer's breach of duty if there was such merely provided the opportunity for the losses to be incurred. I have set out my conclusions on the prospects of success of the original litigation. Albeit that the chances of success were limited, there was a prospect in my judgment of the claimant proving that if Dyer had complied with their duty of care she would not have proceeded with the venture and sustained loss. In those circumstances in my judgment the negligence was the effective cause of the loss and the claimant is entitled on that basis to recover damages."
In the light of those findings, on this appeal Mr Simon Monty QC, on behalf of the solicitors, has raised three issues. They are essentially as follows: (1) whether Mrs Dixon fails on the simple ground that, in the light of the judge's findings, she would, on the balance of probabilities, have been unable in the underlying litigation against the accountants to prove the causation of her loss because on those findings she was likely to have pressed on with her decision to buy the shop and secure her borrowings on her home despite any...
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