Maden v Clifford Coppock & Carter (A Firm)

This is an appeal brought by a firm of solicitors, Clifford Coppock & Carter (“Cliffords”) against an award of damages made against them by Mr Recorder Allen QC, sitting as a Deputy Judge of the High Court in a judgment given on 28^th November 2003. The appeal raises two points. The first concerns the proper approach when a claimant has two causes of action against different solicitors, arising out of different acts of negligence relating to the same property which result in connecting or overlapping damages. The second point concerns the circumstances in which the court should award damages on a “loss of a chance” basis.

On 3^rd April 1991, Mr Maden purchased land (“the Land”), amounting to about 2½ acres, at St Phillip’s Drive, Royton, Oldham for £76,000. The solicitors acting for him in connection with this purchase were Mark Goodwin & Co (“Goodwin”). Having purchased the Land with the intention of developing it, Mr Maden started levelling works in September 1991. However, a Mr Wardle, who was in occupation of about three-quarters of an acre of the Land (“Plot A”), immediately started proceedings (“the Wardle action”) against Mr Maden, seeking a declaration that he, Mr Wardle, had acquired title to Plot A by adverse possession, and damages. Plot A was disproportionately valuable in relation to the development potential of the Land.

Thereafter, Mr Maden obtained legal advice, both in connection with the Wardle action, and in connection with proceedings which he might bring against Goodwin on the basis that they had been negligent in their handling of the purchase of the Land on his behalf.

In October 1991, Mr Maden offered Mr Wardle £19,000 and costs to give up his claim, but Mr Wardle said he was only prepared to settle for £150,000.

During 1992, various steps were taken in connection with the Wardle action and, in October 1992, Mr Maden started proceedings against Goodwin (“the Goodwin action”). In those proceedings, Mr Maden contended that Goodwin had been negligent in connection with the conveyancing transaction, and in particular had failed to carry out a proper search against the Land, which would have revealed Mr Wardle’s pending application for registration of title to Plot A by adverse possession.

Mr Maden’s claim for damages against Goodwin was put in two alternative ways. The first was a claim for £364,000, consisting of loss of profit through being unable to develop the Land (£320,000), cost of interest on the borrowing used to finance the purchase of the Land (£25,000) at £68 per day, and legal and professional costs (£14,000) as well as diminution in the value of the property due to the existence of a footpath (£5,000). The alternative basis was diminution in the value of the Land (£200,000), plus the legal and professional costs and the diminution due to the footpath, amounting in all to £219,000.

Meanwhile, in August 1992, the history was further complicated by the fact that Mr Maden brought proceedings against a Mr Shaw who claimed rights over another part of the Land. Those proceedings were ultimately settled for a comparatively small sum, and do not need to be referred to further for the purposes of this judgment.

During 1993, there were vague attempts to settle the Wardle action, but they ceased when Mr Wardle died on 3^rd November. However, on 18^th January 1994, a Mrs Chadburn obtained probate of Mr Wardle’s will and took over the Wardle action, with the benefit of legal aid. On 5^th April 1994, she offered to give up any claim to or over Plot A, or to damages, for £75,000, but that offer was rejected by Mr Maden, who offered her £5,000 inclusive of costs.

In June 1994, Mr Maden paid £5,000 into court for the account of the Wardle action. Apparently coincidentally, less than three weeks later, Goodwin paid £5,000 into court on account of Mr Maden’s claim against them. On 19^th October 1994, Mr Maden paid a further £5,000 into court on account of the Wardle action.

On 2^nd June 1995 and 13^th March 1996, Goodwin increased the payment into court on account of the Goodwin action to £25,000 and £60,000 respectively.

On 28^th March 1996, Mrs Chadburn made an offer to Mr Maden to settle the Wardle action for £75,000 plus the costs she had incurred since April 1994 (when she had been formally substituted as claimant for Mr Wardle). This was not accepted by Mr Maden.

Having offered to settle the Goodwin action for £80,000 in April 1996, Goodwin increased their offer to £100,000 plus costs on 17^th April 1996, and that offer was accepted on behalf of Mr Maden the following day. The terms of settlement between Mr Maden and Goodwin were contained in an order in Tomlin form, dated 20^th April 1996. Under that order, Mr Maden agreed:

Meanwhile, on 25^th June 1996, Mrs Chadburn’s solicitor, Mr Hyman, said he was prepared to discuss with her a payment of £20,000 plus her costs, in return for giving up her claim to Plot A and the claim for damages. Because the trial of the Wardle action was due to be heard shortly, there were negotiations between the respective solicitors of Mrs Chadburn and Mr Maden between July 1996 and September 1996. Unfortunately, this did not lead to a settlement of the Wardle action, although the parties got quite close.

Towards the end of August 1996 Mr Maden was prepared to offer Mrs Chadburn £15,000 plus costs. A meeting then took place between Mr Maden accompanied by a representative of Cliffords and Mr Hyman, Mrs Chadburn’s solicitor, on 3^rd September 1996. At that meeting Mr Hyman put forward an offer to give up her claim for adverse possession and damages in return for the payment of £25,000 plus costs. Mr Maden rejected that offer.

On 18^th September 1996, Mr Maden increased his payment into court on account of the Wardle action to £12,000. The last communication of any settlement proposal was on 4^th April 1997 when Mr Hyman repeated Mrs Chadburn’s offer to settle the Wardle action for £25,000 plus costs.

The Wardle action came on for hearing before His Honour Judge Maddocks on 9^th April 1997, and on 14^th April 1997 he gave judgment. He found in favour of Mrs Chadburn’s adverse possession claim, and accordingly declared that she owned Plot A. He also awarded her £2,914 damages, together with interest and costs. Accordingly, Mr Maden lost Plot A and was liable for damages, Mrs Chadburn’s costs, and his own costs of the Wardle action.

Throughout the Wardle action, Mr Maden was represented and advised by Cliffords. He took the view that he had been badly advised by them, and accordingly he brought the present proceedings. The essence of his complaint, as recorded in the Particulars of Claim (which were attached to the claim form issued on 31^st October 2000) was that Cliffords had advised him “that his payments into court would have the effect that even if he were to lose at trial he would not be ordered to pay the other side’s costs unless the other side obtained an award of damages which exceeded the payment into court”.

The problem with this advice was, of course, that Mr Wardle and, after him, Mrs Chadburn, were advancing as their primary claim the contention that they owned Plot A, and the claim for damages was relatively subsidiary. Mr Maden’s Particulars of Claim further alleged that, if Cliffords had not been negligent in this way, Mr Maden “would have made an improved offer to Mrs Chadburn” and, in particular, “would [have been] likely [to] have settled the [the Wardle action] by not later than shortly after the meeting of 3^rd September 1996”.

At the trial of Mr Maden’s claim against Cliffords, the Deputy Judge heard evidence from four people: Mr Maden himself and three witnesses for Cliffords, Mr Carter of Cliffords, Ms Dolan, formerly of Cliffords, and Ms Grant of James Chapman & Co, the solicitors who acted for Goodwin in connection the Goodwin action. The judge also received expert evidence from a single joint independent surveyor.

In a reserved judgment, the Deputy Judge gave judgment for Mr Maden. The judge concluded that the advice given by Cliffords to Mr Maden, to the effect that he would be protected against any claim for costs by Mrs Chadburn if the damages awarded in her favour in the Wardle action were less than the payment into court, was, not surprisingly, negligently wrong. He also concluded, again perhaps not surprisingly, that Mr Maden was influenced in his attitude to his negotiations with Mrs Chadburn by the wrong advice he had been given.

At paragraph 50 of his judgment, the judge said this:

Having referred to the risk of Mr Maden’s failing in his resistance to the Wardle action, and to his likely level of costs, the Deputy Judge said this in paragraphs 65-67 of his judgment:

The Deputy Judge then went on to consider two further points relating to the issue of damages, namely quantum, and the effect of the Goodwin action and its settlement. As to quantum, his award consisted of three components. The first was the figure of £17,500, being the difference between the value of Plot A, £37,500, and the £20,000 which Mr Maden would, had he been properly advised by Cliffords, have paid. The second component was the costs which Mr Maden had to pay Mrs Chadburn in connection with the Wardle action, but only from 30^th September 1996. The third component, which was to be subject to an inquiry, was the costs and disbursements incurred by Cliffords on behalf of Mr Maden in the Wardle action, but only after 30^th September 1996.

In the final part of his judgment, the Deputy Judge went on to consider Cliffords’ contentions in relation to what he and the parties called “double recovery”. In that connection, the case for Cliffords was that no damages should be awarded to Mr Maden in the present proceedings, notwithstanding the conclusions reached in the judgment, because Mr Maden had already been fully compensated for any loss by the payment of £100,000 (plus costs) by Goodwin in the Goodwin proceedings. The Deputy Judge rejected that argument, essentially on the ground that, in light of the evidence (in particular that given by Ms Grant, Goodwin’s solicitor in the Goodwin action) the £100,000

In a later passage, in his judgment, the Deputy Judge appears to have identified another reason, effectively based upon principle rather than evidence, for rejecting Cliffords’ contention that Mr Maden had recovered damages from Goodwin in respect of any loss for which he was now seeking compensation from Cliffords. In paragraph 93 he said this:

This appeal, which is brought with the permission of Mummery LJ, is based on the contention that the Deputy Judge went wrong in two respects. First, it is contended that he should not have awarded any damages against Cliffords, because Mr Maden had already been compensated, through the payment of £100,000 from Goodwin, for any loss in respect of which he is seeking to recover from Cliffords. Secondly, it is said that, even if the Deputy Judge was otherwise right in his conclusions, he should have discounted the damages he awarded by an appropriate percentage to allow for the fact that a settlement of the Wardle action might not actually have happened. I shall take those two arguments in turn.

Was the judge right in his decision not to take into account any aspect of the £100,000 received by Mr Maden from Goodwin in the Goodwin action, when deciding the extent of the damage suffered by Mr Maden as a result of Cliffords’ negligence? Difficulties can undoubtedly arise where a claimant has causes of action against two defendants, arising out of different contracts or events, but which result in what one might characterise a connected damage. It is an area of law where the proper outcome must depend very much on the particular facts, and it is therefore dangerous to lay down any general principles, beyond the proposition that a loss which has been compensated for in one set of proceedings could not normally be recoverable in another set of proceedings because it would no longer be a loss.

In the present case, it appears to me that the judge reached the right conclusion, not for his primary reason, namely the evidence of Goodwin’s solicitor as to how the £100,000, which was paid to Mr Maden to settle the Goodwin action, was arrived at, but for his subsidiary reason, namely that, as a matter of principle, the two sets of claims and heads of damage were, on analysis, unrelated and could not, as it were, impinge on each other.

The simplest way of demonstrating that conclusion in the present case is by reference to the fact that Mr Maden’s right to receive the £100,000, and his actual receipt of that sum, occurred in April and May 1996, whereas the act of negligence, and the damage suffered as a result of the act of negligence, which Mr Maden established against Cliffords only occurred in September 1996, some four or five months’ later. As at 3^rd September 1996, if Cliffords had advised Mr Maden, as they should have done, that he was not protected against costs in the Wardle action by a payment into court then, as the judge found, he would have settled the Wardle action by a payment of £20,000 on or around 30^th September 1996. The damages awarded by the Deputy Judge in this case were predicated on the hypothesis that Cliffords could and should have advised Mr Maden in September 1996 that he was not protected by a payment into court, and that, had that advice been given, the Wardle action would have been settled by Mr Maden at the end of September 1996. Accordingly, before Cliffords’ crucial act of negligence occurred (ie the act of negligence which gave rise to the award of damages), and the recoverable losses were, or started to be, incurred by Mr Maden, namely in September 1996, Mr Maden had already not merely got a vested cause of action against Goodwin, but had been paid out in full by Goodwin.

The point can be put another way. By 1^st September 1996, Mr Maden had recovered the £100,000 from Goodwin, which he was entitled to keep, come what may. As at the same date, 1^st September 1996, and thereafter, he was entitled to expect Cliffords to give him competent advice. If they had done so, then he would be in the position in which the Deputy Judge’s award of damages was intended to put him, plus, of course, he would be able to keep the £100,000. In those circumstances, it would seem to defy reason if Cliffords could contend that, because they were negligent subsequent to 1^st September 1996, and that negligence put Mr Maden in a worse position than that in which he would have been had Cliffords not been negligent, they are entitled to require Mr Maden to take into account some of the £100,000 in their favour, even though he would have been fully entitled to keep the whole of the £100,000 and be in the position that the Deputy Judge’s award of damages is intended to put him, if they had not been negligent.

It is not merely that Mr Maden suffered the loss he complains of in these proceedings after his cause of action arose against Goodwin, and was settled and paid out by Goodwin; it is also that the loss of which he complains in these proceedings was caused by a fresh act of negligence by someone other than Goodwin, a novus actus interveniens, namely the negligence of Cliffords, which resulted in a loss which, but for Cliffords’ negligence would not have been suffered by Mr Maden.

In these circumstances, I find it impossible to understand how it can logically be contended that, even if the £100,000 which Mr Maden received from Goodwin in order to settle the action against them was much higher than is easy or even possible to justify, this should somehow redound to the advantage of Cliffords.

The settlement of the Goodwin action involved Goodwin and Mr Maden taking a view as to the risks, as to liability, quantum, costs and interest. I readily accept that Mr Maden’s statement of claim in the Goodwin action was inflated, and quite possibly very inflated. This does not alter the fact that there must have been all sorts of factors that could reasonably have been expected to be in play in the minds of the litigants and their advisors when agreeing a settlement of the Goodwin action. What was ultimately agreed between Goodwin and Mr Maden gave rise to a contract binding between them, which then matured into an issue estoppel, through the medium of the Tomlin order, which was again binding on them. It was not, however, binding in any way as between Mr Maden and Cliffords.

Thus, if Mr Maden and Goodwin had agreed a breakdown of the £100,000 and it could be shown that a certain sum (eg in respect of the interest which Mr Maden had to pay) was much greater than it should have been, or that Goodwin paid too much because they were worried about the publicity of a trial of the Goodwin action, that would not entitle Cliffords to claim a reduction in the damages for which they would otherwise be liable.

In the absence of any negligence by Cliffords, the effect of the settlement of the Goodwin action would have been that Mr Maden, probably thanks to his negotiating skills, would have received, at least on Cliffords’ argument in the present case, a significant windfall in his favour. If as a result of a wholly unconnected and subsequent act of negligence, Cliffords are sued by Mr Maden, it is hard to see why the benefit of all or part of that windfall should somehow be lost to Mr Maden and transferred to Cliffords, who did nothing to earn it, and have no other reason for escaping liability for damages.

I should add that my view on this point would be no different if the Goodwin action had been settled after, as opposed to before, September 1996. The essential features, at the risk of being criticised for using Latin twice in one sentence, are that, as between Mr Maden and Cliffords, the Goodwin action was res inter alios acta, and, from the standpoint of the litigation and settlement in the Goodwin action, Cliffords’ negligence in 1996 was novus actus interveniens.

If, as seems very likely, the £100,000 payment to settle the Goodwin action was more than Mr Maden could have recovered, even on a fairly optimistic view, had the Goodwin action fought, the problem in the present case arises from the fact that Goodwin paid too much to settle Mr Maden’s claim against them. That is a matter between Goodwin and Mr Maden, and, for the reasons already mentioned, I find it very hard to see how that can assist Cliffords on the question of the damages recoverable from them by Mr Maden.

It is right to say that, where a claim is brought by the same claimant against different defendants, in connection with different breaches of duty committed at different times arising out of different retainers, but arguably leading to inter-related damages, the obvious, sensible course is to ensure that the two actions are heard together.

It is interesting to consider what would have happened if the present claim and the Wardle action had been heard together. It seems to me that the first step would have been to carve out Cliffords’ act of negligence, and assess the damage suffered by Mr Maden as a result of that negligence, on the basis that it was a self-contained, and later, act of negligence which caused a separate head of damage. One would want, as it were, to get it out of the way, so that it did not infect the assessment of damages which were properly attributable to the negligence of Goodwin, because some of the costs incurred by Mr Maden in relation to Mr Wardle would be recoverable from Goodwin, but, plainly, Goodwin could not be held liable for those damages which were attributable to the negligence of Cliffords. Accordingly, at this notional hearing, one would, as it were, take out the damages attributable to Cliffords, and then concentrate on the damages attributable to Goodwin.

Having reached this conclusion, it is arguably unnecessary for me to express a view as to the principal basis upon which the judge reached the same conclusion, namely on the basis of the evidence as to Goodwin’s reasons for agreeing to pay £100,000 to settle the Goodwin action. In my judgment, however, that evidence was simply inadmissible. When considering commercial or professional actions or contracts, the law very rarely inquires into the mind of any of the parties involved. Thus, where a court is concerned with the effect or terms of a contract, it does not inquire as to what the parties intended. Even where rectification of a contract is sought, it is classically the words used between the parties, and not what was locked in their minds, which is of relevance (see for example Frederick E Rose (London) -v- William H Pim Jr & Co [1953] 2 QB 450 where rectification was refused, because, although both parties had the same intention, it was never communicated between them).

Of course, there are occasions when the law will look into the mind of a particular person, an obvious example being where the state of his knowledge or his honesty is at issue. However, in general, for obviously sensible reasons, when one is concerned with what is essentially a bilateral arrangement, such as the settlement of an action the law normally limits itself to what passed between, and was known to, the two parties. It can be unsafe to rely upon subsequent oral evidence of one of the parties, let alone his solicitor, as to what was or may have been in his mind several years earlier, when he settled the action.

In the present case, where the terms of the settlement of an action between Mr Maden and Goodwin are being relied on by a third party, who had nothing to do with the settlement, namely Cliffords, it appears to me that it is particularly inappropriate for Cliffords to seek to rely upon second-hand evidence as to what was in the mind of Goodwin at the time of settlement.

Quite apart from anything else, the two parties to the settlement may have had somewhat different reasons for settling. When one comes to consider a global settlement, it is impossible, at least in most cases, to attribute appropriate, let alone conclusive, weight to the various factors which may have been in play.

Goodwin’s insurers may have been keen not to have a case which gave rise, in this case, to an unfortunate new precedent. The insurers may have been worried about the claim for loss of development profits. Despite Ford -v- White & Co [1964] 1 WLR 885, which suggests that the measure of damages would be limited to the value of the Land at the date of acquisition, there is authority, such as Cottrill -v- Steyning & Littlehampton Building Society [1966] 1 WLR 753, which suggests that loss of development profits can, in an appropriate case, be claimed. Despite the fact that Mr Maden was able to start developing much of the Land in 1994, the delay could have resulted in loss of profits, and did result in a substantial liability for interest, albeit not, I suspect, as much as was claimed.

If, contrary to my view, the terms upon which the Goodwin action was settled were of relevance to the present claim, it would, I think, be necessary to consider the actual terms of settlement, ie the terms of the Tomlin order, and the pleadings in the Goodwin action. Ultimately, I think one would have to have made a commercial judgment as to how the £100,000 was made up by reference to those documents, and an objective assessment of the way in which the £100,000 settlement figure was made up.

The very difficulty involved in that exercise can be said to support the view that it would only be in exceptional circumstances that such an exercise was justified. After all, unless the parties to the Goodwin action had spelled out, in their terms of settlement, how the £100,000 was to be apportioned, it would be very much a matter of opinion, even inspired guesswork, how one should apportion the £100,000. Even if the terms of settlement had spelled out the apportionment, I do not think that that would by any means be conclusive so far as third parties were concerned.

In the event, it is unnecessary to travel down this route, because, in my view, as a matter of principle, the judge was right to reject the argument advanced on behalf of Cliffords on what is the first ground of appeal.

I turn, to the second ground of appeal. The effect of the judge’s findings in paragraphs 65 and 66 of his judgment was that “on a balance of probabilities”, Mr Maden and Mrs Chadburn would have settled the Wardle action by Mr Maden paying Mrs Chadburn £20,000 and costs; indeed, the judge considered that the prospects of such a settlement were “high”. The effect of paragraph 67 is that he considered that such a settlement would have been reached on 30^th September 1996.

When damages are being assessed by reference to what would have happened (and this is most common in the context of solicitor’s negligence case, such as the present), the applicable principles are as laid down in Allied Maples Group Limited -v- Simmons & Simmons, referred to by the judge in paragraph 66 of his judgment (cited above) and to which his attention has been very properly drawn by counsel for Mr Maden. The application of the principles in that case to the facts of the present case appears to me to involve the following propositions.

First, the court must inquire what would have happened if Cliffords had given the right advice at the beginning of September 1996. Secondly, that involves considering whether, as Mr Maden contended and the judge accepted, the Wardle action would have settled. That in turn involves considering how two parties, namely Mr Maden and Mrs Chadburn, would have acted in hypothetical circumstances, and in particular whether they would have been prepared to settle the action at £20,000. So far as Mr Maden is concerned, he had to satisfy the judge, albeit only on the balance of probabilities, that he would have settled on those terms: that is because he was the claimant in these proceedings, and therefore the court had to arrive at a conclusion, one way or another, whether he would have settled. However, the other party to the hypothetical settlement, Mrs Chadburn, is not a party to (and was not even a witness in) these proceedings. Therefore the judge should have considered what prospects there were of her settling the action on the terms on which Mr Maden would, on the balance of probabilities, have been prepared to settle. Further, unless the judge was certain, or very close to certain, that Mrs Chadburn would have settled the Wardle action in September 1996 for £20,000 and costs, he should have discounted the award of damages to take into account the uncertainty.

There was some, albeit brief, argument as to whether, on the evidence before him, the Deputy Judge would have been entitled to conclude that Mrs Chadburn would have been effectively certain to settle the Wardle action on those terms, but I do not think we need to go into that. On no fair reading of paragraphs 65 and 66 of his judgment did the Deputy Judge come to such a clear view. In my opinion, although it is true that in paragraph 66 he referred to being “satisfied on a balance of probabilities” that such a settlement would have happened, I do not consider that that means, as counsel for Cliffords suggests, that it was no more than a 60% chance. The judge was merely emphasising that his decision was, as it were, on the right side of the line from the point of view of Mr Maden, and on the wrong side of the line from the point of view of Cliffords. In connection with the loss of chance, his statement in the preceding paragraph that “the prospects” of a settlement “would have been high” is of importance.

Quite apart from that, it seems to me that Mrs Chadburn would have been very likely to settle for £20,000 and costs, given that she had put forward an offer of £25,000 plus costs, and that her solicitor had indicated that he would probably recommend a settlement of £20,000 plus costs. Of course, parties in litigation do turn down offers which they and their solicitors have indicated they would accept, but in light of the uncertainties involved in the Wardle action, the relatively high potential liability for costs, and the fairly consistent approach to settlement by Mrs Chadburn, I consider that, while a discount was appropriate, it should not be a very large discount.

Accordingly, I am of the view that the Deputy Judge was wrong not to make a discount in the damages he would have awarded, in light of the principle laid down by this court in Allied Maples, but that, in light of the findings he made as to the likelihood of settlement, and probabilities as revealed by the evidence, the discount in the damages should not be great. I would assess the likelihood of a settlement at £20,000 occurring on or about 30^th September 1996 at 80%.

Accordingly, I would dismiss the first ground of appeal, but would allow the second ground of appeal to the extent of discounting the damages awarded by the judge by 20%.

I agree.

I also agree.