Veitch v Avery
| Jurisdiction | England & Wales |
| Judge | Lord Justice Auld,Lord Justice Sedley,Lord Justice Leveson |
| Judgment Date | 12 July 2007 |
| Neutral Citation | [2007] EWCA Civ 711 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: B2/2005/1145 |
| Date | 12 July 2007 |
[2007] EWCA Civ 711
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM EXETER COUNTY COURT
HIS HONOUR JUDGE OVEREND
Royal Courts of Justice
Strand, London, WC2A 2LL
the Right Honourable Lord Justice Auld
the Right Honourable Lord Justice Sedley and
the Right Honourable Lord Justice Leveson
Case No: B2/2005/1145
Mr Robert Akenhead QC for the Appellants
Mr Bernard Livesey QC & Mr Ben Hubble (instructed by Morgan Cole) for the Respondent
Hearing dates : 23 rd & 24 th April 2007
Judgement
Lord Justice Auld:
Introduction
This is an appeal by Mr and Mrs Stuart Veitch, the claimants/appellants, on issues of causation and quantum from an order of His Honour Judge Overend of 12 th May 2005, awarding them £5 by way of nominal damages for negligent advice of their former solicitor, Mr Philip Avery, the defendant/respondent, in connection with a possession action against them by Barclays Bank (“the Bank”) as legal chargee of their hotel, Dunsford Mill in Devon. There is also a cross-appeal by Mr Avery on the issue of causation.
The facts
In the early 1990s Mr and Mrs Veitch owned and ran Dunsford Mill as a country house hotel. They did so with other members of their family, all of them without wages other than drawings for basic expenses, but with some financial help from time to time from Mr Veitch's father. The hotel was subject to a 25 year legal charge with the Bank supporting an agreement for a commercial loan of £335,000 from the Bank on terms that repayment of capital was deferred and with monthly interest at 2% over its base rate, subject to a minimum of 9% – then about £4,300 per month. In the event of a default in the payment of interest, the agreement provided that the outstanding loan and all accrued interest became repayable forthwith on written demand. In addition, the Bank allowed Mr and Mrs Veitch overdraft facilities on their current account with it.
From December 1990 until March 1994 the Bank apparently granted Mr and Mrs Veitch “an interest holiday” under the loan agreement, and, pursuant to it, they paid no interest during that period. However, by early 1994 the Bank had become concerned about the viability of the business. It had been barely profitable. Discussions with the Bank about a further loan of £25,000 by way of contribution to the cost of a conservatory extension to enhance profitability had stalled, and eventually came to nothing for want of a matching contribution from Mr and Mrs Veitch. And, in February 1994, matters were made worse by the Hotel having to close for over a month because of flood damage. Not surprisingly, the business's current account overdraft with the Bank had come under strain, rising above its limit to about £30,000.
In March 1994 the Bank closed Mr and Mrs Veitch's current account and withdrew their credit and debit card facilities. It also maintained that they were in default of their interest payment obligations under the commercial loan, and demanded repayment of a sum, as later amended, of over £330,000 representing principal and interest due. In the event, as the Judge was to hold, they were probably not in default because of the arrangement for deferred repayment of capital and the interest holiday allowed by the Bank.
Mr Veitch's response to all this was one of indignation, which rapidly turned to aggression. He wrote abusive and threatening letters to the Bank, and complained about its treatment of him and his wife in letters to the Fraud Squad and the Banking Ombudsman.
In July 1994, the Bank instituted possession proceedings against Mr and Mrs Veitch. They sought advice from Mr Avery. He wrongly advised them that they were in default under the loan agreement and that they had no defence to the possession proceedings. They accepted his advice and, as a result, did not defend them. And, on 11 th November 1994, they consented to an order for possession of the hotel, suspended on condition of their clearing the current account overdraft balance and paying about £2,800 a month towards the interest due under the loan (considerably less than the contractual rate of interest of about £4,300) which had been reinstated.
However, although Mr Veitch (his marriage to Mrs Veitch by this time had run into difficulties) attempted to continue to run the hotel business, it does not appear to have generated enough income to enable him to make the regular payments to the Bank required by the consent order. He made only one payment – in April 1995. He did not feel he should approach his father for help, given the threat to the security of any advance that he might make posed by the suspended possession order. And, for whatever reason, Mr Veitch Senior did not offer any such support. However, in April 1995, he cleared the current account overdraft, which by then had risen to over £36,000, leading the Bank to restore the use of the current account, but only on condition that Mr Veitch kept it in credit. It is plain that, given all the circumstances and without further financial support, continuation of the business was not viable on that banking basis, and in the same month Mr Veitch came to the conclusion that he had no alternative but to close the hotel.
In October 1995 the Bank obtained possession of the hotel, and in January 1996, it sold it for £252,000, significantly less than the sum of over 330,000 then due to it.
In July 1997 and November 2000 Mr and Mrs Veitch respectively issued proceedings against Mr Avery in the Plymouth County Court, claiming – as eventually pleaded—damages in negligence for loss of their hotel, their business and their home, alternatively for loss of a chance of being able to retain them. After a long and unfortunate history, the matter came before His Hon Judge Overend in January 2004 on an issue of liability only. In a reserved judgment on 30 th January 2004, he held that Mr Avery's advice that they had been in default and to consent to the suspended possession order was negligent (“the liability judgment”).
In a subsequent hearing on the issues of causation and quantum before Judge Overend in early 2005, Mr and Mrs Veitch's case was that Mr Avery's negligence in causing them wrongly to consent to the suspended possession order led to their loss of the hotel, the business and their home and some ten years of profitable trading that would have culminated in an increased capital value of the hotel as a running concern at the date of the quantum hearing, alternatively for the loss of a chance of trading through the recession to achieve that outcome.
In his judgment of 24 th April 2005 (“the causation and quantum judgment”) the Judge found in favour of Mr and Mrs Veitch on the issue of causation, holding that Mr Avery's error, in failing to advise them to defend the possession proceedings and in advising them to consent to the suspended order of possession, had put them into a vulnerable position leading to their loss of the hotel. As to quantum, he held that the business had, since early 1994, been “doomed to failure in any event”, thus rejecting their claim of the loss of up to ten years' profitable running of the hotel business and the alternative claim of loss of a chance to have traded out of their difficulties so as to achieve that outcome. He held that the only candidate for the measure of the loss, if any, was the net value of the hotel and business at the date of their dispossession in October 1995, which, as it was less than their equity in it, entitled them to only nominal damages.
Causation
As to causation, the point taken by Mr Bernard Livesey QC on behalf of Mr Avery in its cross-appeal is that the conduct of Mr and Mrs Veitch, not that of Mr Avery, caused their loss of the hotel in October 1995. His submission was that the cause of the October 1995 possession order was Mr and Mrs Veitch's failure to comply with the condition in the November 1994 suspended possession order, not Mr Avery's negligent failure to advise them to defend the possession proceedings or his advice to consent to the suspended possession order.
This was a point that Mr Livesey had taken before the Judge. The Judge's response to it, at paragraph 25 of his judgment, was as follows:
“… it would be wrong to conclude that the undoubted non-payment of the amounts due under the consent order was the dominant or effective cause of the loss of the hotel, so as to exculpate Mr Avery on causation grounds. The solicitor's breach gave the Bank the opportunity to negotiate terms from an apparent position of strength – which they used to secure a conditional suspended possession order. The breach did not afford the Defendants any opportunity other than to accept the terms offered by the Bank. … unless it can be said that the business was doomed to failure in any event … common sense dictates that a failure to comply with imposed terms that included a suspended possession order is not the cause of a loss of possession if, through the negligence of the solicitor, the opportunity was lost of negotiating better terms, that might not have included a suspended possession order.”
For the reason given by the Judge, I consider that a tenable conclusion on the evidence before the Judge, which, it is to be remembered, is one as to causation, not of a failure of a so-called duty to mitigate; see the brief, but helpful, review by Toulson J, as he then was of the relationship between causation and mitigation of damage in Standard Chartered Bank v Pakistan National Shipping Corporation & Ors (No 3) [1999] 1...
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