Tom Hoskins Plc v EMW Law (a firm)

This is an action for professional negligence brought by the claimant Tom Hoskins PLC (“TH”) against the defendant firm of solicitors, EMW Law (“EMW”). The alleged negligence arises out of the way in which EMW handled the sale by TH to a company called Inn Spirit Limited (“ISL”) of a portfolio of five public houses and a brewery. The main allegation is that, by reason of EMW’s negligence, TH was only able to complete the transaction late and on relatively unfavourable terms. Because of the delay, TH claims that it suffered loss (by being obliged to complete on less favourable terms) and also continuing trading losses. This latter point raises a question of the recoverability of such trading losses in law. TH also alleges that EMW provided negligent advice in relation to a £50,000 retention from the proceeds of the eventual sale.

TH was, at the time, a company involved in the acquisition and running of a brewery and a chain of public houses. It got into financial difficulties and had determined to sell off all its properties. The plan was to create a cash shell which would be available for acquisition as a vehicle for another business.

The transaction, in the form in which it ultimately went forward, was the sale of four leasehold public houses and one freehold public house and brewery. The landlord (in the non-public-house sense) of three of the leasehold public houses was a company called Wellington. The fourth leasehold public house belonged to private landlords, a Mr and Mrs Read. The remaining property was a pub and brewery of which TH were the freeholders. A schedule of the properties, and the various parties involved in the negotiated sale is set out below:

The allegations of negligence concern the failure by EMW law to obtain the landlord’s consent to assign in respect of the leasehold properties in time for the contract to be made unconditional. Moreover it is alleged that EMW were negligent in the drafting of the contract of sale by allowing it to go forward in a form which allowed the assignee to refuse to give directors’ guarantees or rent deposits to the landlords when they knew that, pursuant to the various leases, the landlords could require such guarantees and request a reasonable rent deposit. The solicitor at EMW Law who had the conduct of the matter was Mr Andrew Winfield.

The lease relating to the Maltsters Public House contained a covenant by the lessee not to assign the premises for an initial non-assignment period but then provided by clause 4(21)(ii) that:

The lease thus places the burden on the existing tenant to submit an application containing details of the assignee, its references and the other information required by the standard application form. The Lessee is also required by sub-clause (iii) promptly to provide to the Company information concerning the Lessee’s existing business and the opportunity for the Company to interview and take references from the proposed assignee and any guarantor. The landlord is then required to serve a counter-notice within 21 working days stating whether or not it wishes to exercise the right of pre-emption afforded to it. Sub-clause (viii) provides:

The important thing to note is that the landlord is permitted by the terms of the lease to require a guarantor or guarantors to enter into a direct covenant with them. The landlord may decide not to require such a guarantor, but if the landlord does require a guarantor, the consent is made expressly conditional on such a guarantee being provided.

The leases in respect of the Fountain and the Countryman had very similar provisions. They required the existing tenant to submit the application, and provided for a guarantor to be provided if the landlord so required, and for the consent to be conditional on the provision of such a guarantor.

The lease in respect of the Rowell Charter allowed the landlord to require that two directors or other persons or company acceptable to the landlord enter into a covenant as sureties for the assignee. Again the lessee was not permitted to assign without obtaining such guarantees if the landlord required them.

Three witnesses gave oral evidence at the trial: Mr Watson and Mr Dudgeon for TH and Mr Winfield for EMW. Mr Watson was Chief Executive and Finance Director until the end of September 2000 when Mr Dudgeon, who had previously been involved as an accountant, was appointed a director and asked to take over the running of the company. Mr Watson and Mr Dudgeon had contrasting styles. Mr Watson was very relaxed and seemed to delegate most tasks to others. Mr Dudgeon was more hands-on and aggressive. Mr Watson’s recollection of events as a whole was extremely vague: that of Mr Dudgeon was, at least in relation to some events, much clearer.

Mr Winfield was a somewhat defensive and at times argumentative witness. This was understandable given that his professional competence was under challenge. As I indicate later in this judgment, I formed the view he did not always limit himself to his actual recollection or lack of it. It is fair to say that this was in part, but not always, a function of the nature of his cross-examination, which mainly took the form of asking him to draw adverse inferences from documents which he was reluctant, perhaps understandably, to accept.

I should note at this point that the main documentation in this case has all come from Mr Winfield’s file. TH’s documentation has been lost due to no fault of their own. This has made the fact-finding exercise more difficult than I suspect it would otherwise have been. That exercise has also not been assisted by the fact that the events in question occurred 10 years ago, and the witnesses’ recollections of the events were, in general, not good.

Andrew Robinson of Business Sales Group (“BSG”), who describe themselves as “Specialist Agents for Licensed Property”, was instructed by TH to find a purchaser for, originally, 11 properties. The transaction was to include the brewery and ten public houses, but from 27^th April it was made clear to EWM that the scope of the transaction had reduced to include only the Tom Hoskins brewery and public house and four other leasehold public houses. This was confirmed in a memorandum from Mr Robinson of BSG to Mr Winfield of 28^th April, in which he suggested that Mr Winfield obtain instructions to send a draft contract and other relevant documentation to the intending purchaser, ISL, as soon as possible. Mr Winfield did so. EMW had acted for TH in respect of earlier transactions disposing of other pubs in the TH portfolio, although Mr Winfield had not been the fee-earner responsible. There is no other initial documentation to confirm the scope of EMW Law’s retainer.

In late March or early April 2000 Mr Watson of TH wrote to Wellington or their agents Criterion requesting Wellington’s consent to the assignment of the leases of the three Wellington pubs. Criterion replied to Mr Watson on 5^th April 2000 with a list of requirements. These included the completion of an application form (which was enclosed) for completion by the assignee, two satisfactory trade references on the assignee, the approval of and an interview with the assignee by the Business Development Manager of Criterion, the discharge of all sums due under the lease, payment of a non-refundable transaction fee and payment of Wellington’s legal costs (whether or not the transaction proceeded). The letter stated that their solicitors would not send out documentation until they had received a solicitors’ undertaking that TH would be responsible for Wellington’s costs. Moreover, the agents themselves would take no further action until TH had returned the application form together with the administration fee. The letter did not ask for a guarantee.

Criterion’s letter also indicated that a schedule of outstanding works would be prepared and asserted that the assignor was normally expected to carry out these works prior to completion of the assignment. Finally it stated that TH could assume that Wellington did not wish to invoke any right of pre-emption under the lease if they did not hear further within three weeks of the date of the letter.

Criterion’s letter of 5^th April was provided to Mr Winfield some time in April 2000.

On 19^th May 2000 Mr Robinson of BSG wrote to Mr Patel of ISL enclosing the Criterion application form for assignment of the three Wellington pubs. He does not appear to have sent a copy of Criterion’s letter of 5^th April. Mr Watson had entrusted Mr Robinson with the task of requesting information from ISL. The covering letter did not contain any specific instructions to ISL, but merely expressed the hope that, as ISL had dealt with Criterion before, it would be a smooth procedure.

By mid June 2000 Mr Winfield was pressing Meade King, the solicitors for ISL to exchange contracts. He said in a letter of 12^th June that he was under pressure from his clients to exchange “this week”. On the same day he wrote to TH on the Wellington pubs and the Rowell Charter (belonging to Mr and Mrs Read) in the following terms:

The letter does show that Mr Winfield was generally aware of the urgency of the transaction. There was no direct response to the query about whether Mr Robinson had the address of Mrs Read. However, whatever the position about the address of Mrs Read, Mr Clarke of TH had already been in touch with the agents Sydney Phillips before 24^th May 2000. On 26^th June 2000 Sydney Phillips had written to Mr Clarke enquiring why they had heard nothing concerning the proposed assignment of the lease to Burns Leisure (an associated company of ISL). Like the letter from Criterion, the letter from Sydney Phillips made the point that consent would only be given if there was a solicitors’ undertaking to meet Mr and Mrs Read’s costs. The letter asked for the name and address of TH’s solicitors. It also made clear that there would need to be a solicitors’ undertaking that all outstanding amounts due to the landlords would be paid out of the sale proceeds.

On 27^th June Meade King wrote to Mr Winfield returning a copy of the draft contract with their amendments and enquiring about the steps which had been taken to obtain the landlord’s consent. They pointed out that in view of the right of pre-emption in the Maltsters’ lease, and a prohibition on assignments to an assignee who is part of a group with a brewer in all the Wellington leases, they felt it was necessary to obtain the landlord’s consent in principle before exchange. Mr Winfield had a conversation with Mr Watson about this shortly after receiving the letter, and after forwarding a copy to him. A copy of the Sydney Phillips’ letter of 26^th June was faxed to Mr Winfield on 30^th June, without any covering letter.

On 30^th June 2000 Mr Winfield wrote to Sydney Phillips. He gave them details of the assignees’ solicitors, Meade King, and asked for details of Mr and Mrs Read’s solicitors. On the same day Mr Winfield wrote to Meade King and sent them a copy of the Sydney Phillips letter, asking them to get in touch with Sydney Phillips direct. The letter also chased Meade King for ISL’s referees as soon as possible.

Also on 30^th June Mr Winfield wrote to Mr Watson at TH explaining that the purchaser’s solicitors had suggested that the contract be conditional on obtaining the landlord’s consent. He said:

Mr Watson did not sign or return the fax.

On 3^rd July Sydney Phillips replied to Mr Winfield with the name and address of Mr and Mrs Read’s solicitors, saying that these solicitors:

Between 30^th June and 4^th July Mr Winfield spoke to Mr Watson on the telephone. On 4^th July Mr Winfield wrote to the purchasers’ solicitors, Meade King, in the following terms:

The letter thus expressly states that an application had been made for a licence to assign. No such application in the sense of the submission of an application form with all necessary information had in fact been made. Mr Winfield was inferring that this was the case, at least as regards the Wellington leases, from his contacts with Mr Robinson, but his approach overlooks the fact that it is ultimately TH who must comply with the requirements of the lease for obtaining consent. So far as the Rowell Charter is concerned Mr Winfield wrote on the same day to the solicitors for Mr and Mrs Read asking for consent in principle from their clients before contracts were exchanged, and also asking them what references they required.

This letter crossed with a letter of 5^th July 2000 from Mylles & Co., solicitors for Mr and Mrs Read, setting out their requirements for consent to the assignment. This included the costs undertaking. Importantly, it included a request that ISL provide two directors to give direct guarantees pursuant to clause 11.3 of the lease. It specifically asked that the provisions of that clause be brought to TH’s and to the assignees’ attention. Finally it requested references, both for ISL and the direct guarantors and the latest audited accounts of ISL.

Thus, by 5^th July 2000, Mr Winfield should have been well aware that at least one of the landlords was requesting directors’ guarantees. This letter was not sent to Meade King

I deal with the detail of the drafting of the contract separately below. Here I note only that contracts were exchanged on 19^th July 2000 in a form which, by Clause 4.6, absolved ISL from the need to give any guarantees or a rent deposit. I shall refer to this contract as the First Contract. The result, of course, was that a conflict was certain to occur between the requirements of at least one landlord and the contractual entitlement of ISL. The completion date was to be 29^th September, a period of over two months from exchange, with a potential postponement period of no longer than one month if the landlords’ consent had not been obtained.

The obtaining of the landlords’ consent remained, at this point, at the forefront of Mr Winfield’s mind. When he informed Mr Watson of the fact of exchange he said that completion would be on 29^th September or earlier on receipt of the landlords’ licence. Meade King wrote on 20^th July saying that they looked forward to hearing further news about the landlords’ consent, and Mr Winfield replied the next day reporting that he understood that ISL had not returned the application form direct to Wellington and requesting them to do it as a matter of urgency. Meade King replied on 31^st July saying they were instructed that this had “now” been done. Despite this Mr Winfield did not relay the contents of Mylles & Co’s letter concerning the requirements of the landlords of the Rowell Charter of 5^th July to Meade King.

On 21^st August Mr Winfield was asked to make a report to TH’s auditors and bank about the progress of the disposals. As to the leaseholds he explained that contracts had been exchanged subject to the obtaining of the landlords’ consents. He reported that it was not anticipated that there would be any difficulties and they should complete within 4 weeks but Tom Hoskins and its agents had to pursue the landlords’ consent. This absence of any perceived difficulties was a recurrent theme of Mr Winfield’s commentary on the landlords’ consents.

On 4^th September Mr Watson wrote to Mr Winfield reporting that Burns Leisure (another associated company of ISL) were not using their best endeavours to get “the assignment” from the landlords and asked Mr Winfield to write to their solicitors to speed things up. He noted that the landlords had not even instructed their solicitors as Burns (ISL) had not even filled in the forms. This information was at odds with what Mr Winfield had been told by Meade King, who had said that the form had been submitted at least to Wellington. It was also at odds with the fact that Mr and Mrs Read’s solicitors, Mylles and Co, had already been instructed, and had written to Mr Winfield, requesting amongst other things a guarantee.

On 6^th September Mr Winfield wrote a strongly worded letter to Meade King. He drew attention to the clauses of the contract which required the purchaser to assist in the obtaining of landlord’s consent. He said that all landlords had indicated that they were willing for assignments to proceed to ISL. He asserted that ISL had done nothing to fulfil these obligations. He gave them five days to comply, failing which their conduct would be treated as a breach and they would seek specific performance or damages.

Meade King’s response by email was that their clients would be sending all the information required by the landlords to them at the beginning of the following week, and they would forward it to Mr Winfield as soon as they received it.

On 20^th September Mr Watson spoke to Mr Patel of ISL. Following their discussion, and on the same day, Mr Watson wrote to Mr Patel. Firstly, he asked when ISL were confident they would be in a position to complete. Once he had that information he would discuss it with his solicitors and see if the completion period could be extended. Secondly, Mr Watson said that, from his own perspective, he would speak to Criterion to confirm the position. Any extension would have to be agreed by his board. Thirdly he said he would be happy to supply barrellage information. Barellage is a key factor in the valuation of public houses, and is frequently asked for by banks extending loans for their purchase. Fourthly Mr Watson suggested an alternative “halfway house” of completing on the freehold property by the end of September and on the leasehold properties later on.

I think that the proper inference from this letter is that ISL were having problems with obtaining finance in time. On the other hand Mr Patel must have brought home to Mr Watson the fact that TH had not yet obtained the landlord’s consent to the assignment, hence the need for Mr Watson to speak to Criterion, Wellington’s property agent. The suggestion made by Mr Watson of the halfway house would have accommodated ISL’s difficulty in raising all the money at once, as well as TH’s difficulty in obtaining the landlord’s consents. This inference is supported to some extent by later documents as well.

On 25^th September Mr Winfield sent a copy of Mylles and Co’s letter of 5^th July direct to Mr Patel at ISL. He had been asked to do this by his client. This is likely to have been prompted by the discussions between Mr Patel and Mr Watson. It seems from an attendance note on Mr Winfield’s file that Mr Patel had asked for information. This was the first time that the requirements of the landlords of the Rowell Charter had been transmitted to ISL or its solicitors.

The following day Mr Watson told Mr Winfield that he had agreed an extension of the completion date with Mr Patel from 29^th September to 13^th October. On 27^th September Mr Winfield wrote to Meade King saying that the new completion date would be 13^th October. The terms of the second paragraph of his letter are informative:

This, as it seems to me, confirms that the extension was at least in part sought on the basis that the landlord’s consent had not yet been obtained because Mr Patel did not know what information was required. That conclusion is further confirmed by a letter which Mr Winfield wrote to TH’s bank on 11^th October, in which he explained that the completion date had been extended to 13^th October “in order to allow the purchaser some further time in which to procure the landlord’s consents”. This was an incorrect way of putting the matter, given that the obligation fell on the vendor and not the purchaser, but it does establish that at least one reason for the extension of the date was further information had to be submitted to obtain the landlord’s consent.

29^th September was the original date set for completion under the First Contract. Up to this point Mr Winfield had made no contact at all with any solicitors acting for Wellington. A note of a conversation between Mr Clarke of TH and Mr Winfield on 29^th September records that Mr Winfield was to chase Gosschalks, Wellington’s solicitors. This is the first mention of Gosschalks on Mr Winfield’s file. This produced a letter from Gosschalks of 5^th October setting out requirements for a formal consent. The letter asked for an undertaking to pay the landlord’s costs and included a schedule of dilapidations. Importantly it included a request (unlike the original letter from Criterion in April) for Stewart Burns, a director, to stand as guarantor and a requirement for Archers Ales to pay a rent deposit equal to a quarter’s rent for each of the properties.

It would appear that the application which Gosschalks had received had been in the name of Archers Ales, an associated company of ISL. Mr Winfield sought to make something of this in his evidence. He suggested that this explained the need for the guarantee. But I think that this was speculation on his part. There was nothing to suggest that Archers Ales were any more of a risk than ISL. In fact, to move things along, Gosschalks sent draft licences to assign for all three Wellington properties under cover of a letter of 9^th October to Mr Winfield. These licences were in the name of Archers Ales. Despite this, Mr Winfield communicated his approval of the licences as drawn: but he did not do so until 24^th October.

The licences, in addition to naming the assignee as Archers Ales, nominated Stewart Burns, a director of Archers Ales (and ISL), as guarantor.

In the meantime, by 9^th October 2000 Mr Dudgeon had taken over as the new Chairman of TH, Mr Watson having left as planned at the end of September. Mr Dudgeon wrote to the bank on that day explaining that some “minor legal matters” were holding up the sales. He said that it was “not easy for us to be cashflow positive and we all appreciate the need to complete the sales as soon as possible”. He asked for the bank’s forbearance until the remaining proceeds of sale came in. Mr Winfield received a copy of this letter with a request that he write to the bank explaining the “delays by Criterion, so that he can appreciate that the matters are soluble, but because we are dealing with parties outside our control.. our hands are slightly tied.”

On 4^th October 2000 Mr Dudgeon had received an offer to purchase the five properties from a Mr Ward of Churchill Taverns, also for the total consideration of £750,000. On 12^th October Mr Dudgeon wrote to Mr Ward saying that if ISL did not complete, EMW would be instructed to deal with him instead. Discussions continued with Churchill until 17^th November when Mr Dudgeon withdrew.

On 11^th October Mr Winfield wrote to Meade King, at the express request of Mr Dudgeon of TH, threatening legal proceedings for specific performance or damages if ISL did not complete on 13^th October.

On 17^th October Andrew Robinson received a fax from Mr Patel of ISL saying that the earliest that ISL could complete on the freehold brewery and public house was Friday 27^th October. He suggested that completion on the other pubs should take place once the assignments were in place. The fax attached a letter from ISL’s bank of the same date on which both sides place reliance. It read as follows:

I think it would be dangerous to read too much into this letter. Mr Head, who appeared for TH, submitted that it showed that ISL had all the funding in place to complete the purchase on September 29^th. I do not accept that submission. The £600,000 figure quoted is less than the asking price, and might have been the limit to which the bank was prepared to lend for the entire package of properties. This would have left a shortfall of £150,000 from the contract price of £750,000 and, if ISL were short of funds, would account for their reluctance to complete. Alternatively £650,000 could have been all that ISL needed, and the balance of £150,000 was available from ISL’s own funds. I think that the former is the more likely explanation. The letter I have quoted above shows that ISL were seeking to borrow more than £600,000 to finance the transaction, and there is no reason to suppose that the position would have been any different two to three weeks earlier.

Mr Patel wrote again to Mr Robinson on 19^th October, nearly a week beyond the extended completion date of 13^th October. Mr Patel had informed Meade King of the revised timetable and had instructed them to chase up the assignments (by which he meant the landlords’ consents to assign). By this stage he had requested funds for the whole deal in three parts: first the freehold property, then the three Wellington Leases and lastly the Rowell Charter. He said that if the “assignment” were obtained by 27^th October then funds would be available for all three parts.

On 24^th October Mr Winfield wrote to Meade King requesting the return of the documents because ISL had never been in a position to complete either on 29^th September or 13th October. He based this suggestion on the letter from Mr Patel of 19^th October, which indicated the that if the “assignment” was obtained by 27^th October funding would be available for all three parts..

Following his approval of the draft Wellington licences on the 24^th October, Mr Winfield received the engrossments, together with draft Rent Deposit Deeds from Gosschalks on 25^th October.

Shortly thereafter Mr Patel wrote to Mr Dudgeon direct, as a response to the threatening letter from Mr Winfield on the 24^th October. He reported that the funding was going to the bank’s credit committee for the second time, as some minor issues from the previous week’s meeting had to be addressed. It is noteworthy that he did not say that his company had been in a position to complete on any of the earlier dates.

On 27^th October Mr Winfield forwarded the three Wellington licences to assign to Meade King, asking that they be signed both by their client and by the Guarantor, Mr Burns. He continued:

On 30^th October Meade King wrote to ISL recording their understanding that the sale of the freehold pub and brewery was to go ahead as quickly as possible for a total consideration of £450,000 and that the sale of leasehold properties would go ahead when appropriate consents had been obtained. Not surprisingly, they added that their clients would not sign the guarantee or give the rent deposit. They relied on Clause 4.6 of the contract. They also pointed out that the assignment would be taken by ISL not Archers Ales. They repudiated the suggestion that their clients had failed to complete, as the contract remained conditional on obtaining the consents, and this had not yet been done in the form required by the contract.

Meade King’s letter also discussed the long stop date for completion. Under the contract the completion date was 29^th September (or earlier if the parties agreed) or, if the consents have not been obtained by 29^th September, 5 working days after the last of the consents is obtained. However if the consents had not been obtained by the expiry of one month from 29^th September, then the agreement was to be treated as rescinded. The question arose as to the effect of the extension which the clients had agreed between them. If the effect was to substitute the date of 13^th October for 29^th September, then the long stop date was 13^th November. Meade King said that they had not seen any evidence of the agreed extension, but asked Mr Winfield to confirm that it was his position that the long stop date was 13^th November.

On 1^st November Mr Winfield reported to his clients Meade King’s refusal to offer guarantees or rent deposits. He maintained his view, despite Meade King’s letter, that ISL were in breach of contract although he did not expand on why this should be so. He told his clients that they needed to decide quickly whether to go ahead with the sale of the brewery for £450,000; whether to “allow them the long stop date of 13^th November (without admission on their part) and if so whether we can procure the Landlord’s consent to the assignments in this time space”. He then said this:

There followed some attempt by Mr Clarke at ISL to persuade Criterion as the agents of the landlords Wellington to drop one or both of the requirements for a rent deposit and a guarantee. These discussions had provoked a reaction from Criterion that they would want one or the other. Mr Winfield followed these discussions up with a letter of 2^nd November 2000 to Gosschalks explaining that Mr Burns had not in the past been required to give a guarantee, and that ISL were not prepared to give a rent deposit. He asked whether they would drop both requirements. Gosschalks replied the following day to say that they would not incur any further costs until they received the costs undertaking. Mr Winfield did nothing to follow this up. In his letter of advice dated 14^th November he maintained his position that ISL were in breach of contract in failing to provide information to the landlords, but suggested this would be difficult to prove.

On 10^th November Mr Dudgeon wrote to Mr Winfield asking for an explanation of the position that had been reached contractually with ISL. Mr Dudgeon was keen to follow up Mr Winfield’s advice that the purchaser was in breach of contract. By now, of course, it was too late to force a completion by the long stop date of 13^th November.

Shortly after November 14^th a meeting occurred at which a revised agreement was mapped out. The revised agreement was to provide for separate sales of the brewery, the Wellington pubs and the Rowell Charter.

The Second Contract was executed on 23^rd November 2000. It was also conditional on obtaining the landlords’ consent to the assignments.

Completion for the freehold pub and brewery was to be by 1^st December 2000, and for the four leaseholds by 21^st January 2001. The sale of the freehold pub and brewery was in fact completed on the contractual date.

On 4^th December 2000 Meade King wrote to Mr Winfield saying that their clients were hoping to complete on the three Criterion pubs before Christmas. They said that they assumed Mr Winfield had heard nothing further about the landlord’s consent. On 11^th December they wrote again asking Mr Winfield if he had “any further views on the landlord’s consent to assign.” On 12^th December Mr Winfield wrote to Gosschalks. He said that Stewart Burns was now prepared to stand as guarantor, and that their clients had agreed to waive the requirement for a rent deposit. This led to exchanges, lasting into early January, between Mr Winfield, Gosschalks and Meade King about whether this was so. Gosschalks confirmed on 4^th January that their clients no longer required a rent deposit bond.

The concession by Gosschalks meant that, so far as landlords’ consent was concerned, everything was in order for a completion on the Wellington pubs on 21^st January, as planned. However at around this time a dispute arose about dilapidations, which I deal with below. Ultimately it was agreed that completion had taken place on 25^th January 2001.

On 2^nd January 2001 Mr Winfield wrote to the solicitors for Mr and Mrs Read, the Rowell Charter landlords, asking them to confirm that they had all the references from the assignee. This provoked a response that they had not received a substantive reply to a letter they wrote to Meade King on 20^th October following a letter from ISL dated 26^th September which was not faxed to them until 19^th October. In addition it raised a problem over outstanding rent.

Mr Winfield wrote to Meade King on 12^th January. They replied on 13^th January that they understood that ISL had forwarded to TH or their agents copies of accounts and details of referees required by the Rowell Charter landlords. They asked what more was required:

Mr Winfield replied on 16^th January complaining about ISL’s inactivity in obtaining the licences for the Rowell Charter. Meade King’s reply was to reiterate that they had supplied everything to TH or its agents. Mr Winfield asked TH whether this was correct, but does not appear to have received a reply. There matters appear to have stood until the completion date.

On 23^rd January, Meade King wrote stating that their understanding that the date for exchange on the Rowell Charter had been extended to mid February, and that their clients had “now” despatched to the solicitors for the landlords the remaining information required by them. By 25^th January 2001 it was agreed that the deadline for completion for the Rowell Charter was 19^th February. On 5^th February the solicitors for the landlords wrote direct to Tom Hoskins having received payment of the outstanding rent for December and January.

In fact it was not until 7^th February that ISL succeeded in submitting some information to the Rowell Charter landlords, although they claimed to have included it in a letter dated 15^th January which the solicitors said they did not receive.

Prompted by the receipt of the information from ISL, on 9^th February 2001 there was a conversation between the solicitors for the landlords of the Rowell Charter and Mr Winfield, concerning the costs undertaking, which Mr Winfield then gave. On 15^th February the solicitors for the landlords wrote pointing out that communication between the parties had been singularly lacking. They asked for further accounting information about Archers Ales. Finally they pointed out that the only communication they had received from Meade King was an acknowledgment dated 23^rd October saying the person dealing with the matter was away. They said that until the information they requested in July of 2000 was available and they had taken their clients instructions they were not in a position to submit a draft licence.

In the end, the sale to ISL of the Rowell Charter did not go ahead on 19^th February or at all. On 22^nd February TH purported to rescind the contract for failure to complete. Meade King replied that whilst it made no difference to the rescission provisions in the contract, TH had not yet obtained the landlord’s consent and was therefore not itself in a position to complete. The Rowell Charter was ultimately sold to Churchill on 24^th April 2001 with completion on 18^th May 2001. The sale proceeds were £25,000 less than they would have been under the First Contract.

ISL’s solicitors’ letter of 29^th June 2000 returned a copy of the sale agreement with a number of amendments put forward for Mr Winfield’s consideration. Clause 4 of the contract had originally provided that the agreement be conditional only on the purchaser obtaining Justices’ protection orders. The principal amendment was to make the whole agreement also conditional upon the consents of the respective landlords to the assignment of the leases. Their solicitors also proposed a new set of terms. In outline these were that the Vendor would be responsible for obtaining the consents and the Purchaser should provide all such reasonable support as the Vendor may reasonably require. The terms proposed provided that if all the consents had not been obtained within a period of one month (or such later period as the parties might agree) from the Transfer Date, then the contract would be treated as rescinded. Finally the agreement proposed that, by a new clause 4.6:

Mr Winfield reported to his clients on the contents of ISL’s solicitors letter by a fax dated 30^th June 2000. He explained that the proposal was that the contract should be conditional, in addition, to the obtaining of the landlords’ consents. Mr Winfield’s advice on this point was:

By absolving ISL from giving guarantees and rent deposits, TH would, if they agreed to this clause, risk losing the sale if any landlord asked for such protection. ISL would be entitled to refuse to give the guarantee, the landlord’s consent would not have been obtained, and the agreement would be liable to be rescinded. Given that all the leases expressly entitled the landlords to ask for guarantees as a condition of consent to the assignment, TH would be taking a considerable risk by agreeing to a clause in this form. By contrast the Law Society’s Standard Conditions provided for rescission only in the event that consent is made subject to unreasonable conditions.

Mr Winfield’s evidence was that he discussed this provision with Mr Watson of TH and explained the risk he was taking. His evidence in his witness statement was he was told that TH were happy to take the risk as the landlords, Wellington, knew ISL from other pubs where it was a tenant and Mr Watson did not anticipate any difficulties. In his oral evidence he elaborated this explanation to include the fact that he was instructed that Mr Burns was known not to give guarantees. Accordingly he was instructed to “chip away” at the clause, but in the end to concede the point if ISL would not reconsider. Mr Winfield does not have an attendance note of this meeting, although he was generally a good record keeper. He cannot remember whether the meeting was in person or not.

Mr Watson’s evidence was that he could not recollect any meeting with Mr Winfield to go through the terms of the draft contract. Although at one point he did appear to accept that Mr Winfield took him through the terms of the draft contract, he had no recollection of being told about the risk involved in clause 4.6. Mr Watson signed the travelling draft, and accordingly must have seen the terms, or at least had the opportunity of doing so, but he had no recollection of doing that either.

I accept that Mr Winfield did take Mr Watson through the terms of the draft contract, but I do not accept that he pointed out the conflict between the draft contract and the leases. I do not accept that the conflict had yet occurred to Mr Winfield. In fact I do not believe that Mr Winfield had studied the requirements of the leases in any detail. If Mr Winfield had spotted the point I would expect to see some record of it in the papers, either by way of a marking on the travelling draft or by way of an attendance note. But there are neither of these things in the well organised records. I do not think it plausible that TH would have instructed Mr Winfield not to tackle the guarantee provision at all based on their knowledge of a prior relationship between Wellington and ISL. This would have done nothing to assist the position between the landlords of the Rowell Charter and ISL. The Rowell Charter lease not only allowed the landlords to require guarantees, but their agents and solicitors made it clear before the contract was exchanged that they would request one.

In rejecting Mr Winfield’s evidence on this point I do not suggest he was actively trying to mislead me. Because the events were so long ago, he had to engage in a serious amount of after-the-event reconstruction. In the course of doing so I suspect he has led himself to believe that events occurred which perhaps should have done, rather than founded his evidence on a clear recollection of events.

When Mr Winfield returned the travelling draft of the contract he put square brackets around the part of clause 4.6 which absolved the purchaser from giving a rent deposit, but left the corresponding provision for the guarantee untouched. In the margin he noted that “A rent deposit would not be an unreasonable request and the Purchaser should not be entitled to refuse”. The inference to be drawn from this selective reference to the rent deposit is that Mr Winfield took no issue with absolving the purchaser from the need to give a guarantee. Or to put it another way, his apparent view was that a guarantee would be an unreasonable request, even though the lease entitled the landlord to ask for one.

ISL’s solicitors’ response was to say that ISL would not agree to any rent deposit. Mr Winfield replied that he was not aware that they would be asked for a deposit. Understandably, the answer that came back was that, in that case, there would be no harm in leaving the clause as drafted. So the agreement stayed in the form drafted by ISL’s solicitors. Here, the “chipping away” at the provision ended.

Considerably later, in a letter of 14^th November 2000, Mr Winfield advised his clients that a term of this kind was “standard” in this type of transaction. He acknowledged in evidence that this was incorrect. What he does not say in the letter (some 3 months after he said he gave the advice) was that he advised TH at the time that this was a risky clause to agree to in a case where the landlord has a right to insist on a guarantee, and that they specifically agreed to accept the risk. I think this is compelling evidence in support of the view which I have formed that Mr Winfield did not, as he now alleges, give this advice at all.

I think it is also significant that in his letter of 1^st November 2000 Mr Winfield expressed the view that it was obvious that the landlord would be reluctant to consent without the guarantee or the rent deposit. This again is not easy to reconcile with what Mr Winfield described as the relevant background, that in view of the relationship between ISL and its associated companies and Wellington, absolution of ISL from giving guarantees was an acceptable risk.

The Second Contract, understandably contained a much modified clause. It required the Purchaser:

The clause does not make it clear who, as between landlord and assignee, has the option of choosing between the alternatives: but this is not a question which I am required to decide.

On 24^th May 2000, well before the First Contract was exchanged, Mr Robinson reported to Mr Winfield that ISL would not pay to put the pubs in order. Mr Winfield reported this to Mr Watson of TH whose reaction was that TH knew the state of repair of the pubs and that they would either do the work, indemnify the purchaser or do a deal with Criterion.

On 10^th November 2000 Mr Dudgeon enquired of Mr Winfield about how the question of dilapidations was going to work, because he had been told by Clive Watson that dilapidations were expressly excluded from the contract with ISL. He said that, in another conversation with Mr Winfield, he had gained the impression that dilapidations have to be agreed between the landlords and TH before the leases are assigned. He specifically asked for advice as to how dilapidations would be dealt with.

Mr Winfield’s response came in his letter of 14^th November 2000. He said:

On 8^th January 2001 Mr Humphrey of TH spoke to Mr Winfield enquiring about his “opinion on the dilapidations position” on the Wellington leases. He was concerned to know whether ISL could use dilapidations to delay completion. The schedule of dilapidations which TH had received from the landlords was faxed to Mr Winfield. On 16^th January Mr Winfield wrote to Meade King enclosing the schedule and asking how ISL proposed these be dealt with at completion. The schedule had in fact been attached to the licences to assign which they had received earlier.

On 17^th January Mr Winfield asked Mr Dudgeon for instructions on the dilapidations. He said he understood that Mr Humphrey was trying to get a quote from a builder to ensure that the Schedule was a proper one. He simply added that TH could then agree with the landlord or the purchaser how the dilapidations were to be dealt with.

On January 18^th 2001 Meade King wrote saying that TH had agreed that dilapidations referred to in the licences to assign would be dealt with by TH. They said that TH were now proposing that the money be lodged with Criterion. Meade King said this would not be satisfactory and requested a retention of £50,000 from the purchase price.

Mr Winfield took instructions. TH instructed him that he could go up to £50,000 if necessary but that he should attempt to agree a compromise particularly as Mr Humphrey was convinced that the builder would come in with a quote of £20,000. He accordingly wrote to Meade King with an offer of a £25,000 retention, subject to some other terms. That offer was rejected directly between ISL and TH, but the parties were prepared to proceed on the basis of a £50,000 retention provided ISL completed on the Rowell Charter by the end of January.

In the end completion for the Wellington pubs took place on the basis of a £50,000 retention. Any surplus would be retained by ISL, but any shortfall would be for TH.

The first question to determine is the scope of Mr Winfield’s retainer. There was no retainer letter. So the scope of the retainer has to be spelled out from the nature of the transaction and the conduct of the parties to it.

A solicitor is not normally required to give general commercial advice to a client. Laddie J put it this way Credit Lyonnais SA v. Russell Jones & Walker [2003] PNLR 17 where he stated this (at [28]):

There is no dispute that it was within the scope of Mr Winfield’s retainer to advise on and draft the terms of the contracts of sale and any other legal instruments connected with it. There is however a real dispute about whether the obtaining of the landlord’s consents to assign was within the scope of the retainer.

As is often the case, a lot turns on how one formulates the question. Posed in the way I have done in the previous paragraph, I think the answer is in the negative. The obtaining of the landlord’s consent was a multi-party activity involving the client, the landlords, the assignee and their various agents and lawyers. It was not Mr Winfield’s job to obtain that consent, any more than it is a solicitor’s task in a conveyancing transaction to obtain finance for the transaction.

The real question is whether it was within the scope of Mr Winfield’s retainer to advise on and assist with the obtaining of the landlord’s consent to assign.

Mr Winfield sought in his evidence to draw a sharp distinction between the obtaining of the landlord’s consent in principle to the assignment on the one hand and the formalities of drafting and executing the landlord’s formal licence on the other. He accepted that the latter was within the scope of his retainer, but maintained that the former was not.

Mr Watson, on the other hand, maintained that Mr Winfield was what he called the “project manager” of the whole transaction.

I think the approaches of these two witnesses respectively underestimate and overestimate the responsibilities of Mr Winfield in connection with the transaction. Mr Winfield was instructed to provide legal advice and assistance in connection with the assignment of the leases. An essential part of the transaction was the obtaining of the landlords’ consent, because the lease could not be assigned without it. The obtaining of the landlords’ consent in principle is not a purely commercial matter, because the leases themselves contained provisions as to (a) who is to make the application, (b) how such applications are to be made and (c) what the landlord may, pursuant to the lease, legitimately require of the assignee.

It seems to me that, although Mr Winfield was not retained to make the application to the landlord for consent in principle, the scope of his retainer extended to providing legal advice and assistance in connection with the making of that application. Thus he needed to ensure that the client was aware of the fact that it bore the responsibility for seeking the consents, that it knew the format for making the application, what matters the landlord had required the application to contain, and what the landlord might, pursuant to the lease, legitimately require of the assignee. Moreover it was within his retainer to ensure that the client was alive to the risks of exchanging contracts without having obtained consent in principle and, later, of approaching the completion date without that consent. Once contracts were exchanged, it was within his retainer to make sure that he knew of the terms on which the landlord was offering to grant consent, and that these terms were made known to the assignee.

An entry in the bill which Mr Winfield submitted prior to completion on 2^nd August 2000 included in the narrative “attending to submission of application to Landlord’s solicitors for Licence to Assign in respect of leasehold properties”. Mr Head relied heavily on this as a clear indication of Mr Winfield’s acceptance that all aspects of the application for consent were within the scope of his retainer. On the other hand Mr Leech, who appeared for EMW, said that as the bill was put in before completion, it simply reflected the fact the work on the formal licence which would have to be completed before completion.

I think that by using the phrase “attending to” the narrative in the bill accurately reflects Mr Winfield’s retainer. He was to give his attention to the application in the way that I have outlined above. That is not to say that every step in the process was his responsibility, or that aspects of the obtaining of the consent, such as the obtaining and provision to the landlords of information about the assignee, would not be performed by others. What it does mean is that he had to attend to the progress of that application and ensure that it was being progressed by his client in full knowledge of their own obligations and of the requirements of the landlord.

Mr Leech accepted that, unless Mr Winfield was specifically instructed to agree clause 4.6, then he was negligent in drafting the contract in that form and failing to resolve the respective and different positions of the landlords and the assignees on the question of guarantees. I have no doubt that that concession was rightly made. Clause 4.6 put the landlords and the assignee on the road to a probable conflict, particularly as Mr Winfield knew that one of the landlords was asking for a guarantee. To agree the contract without alerting TH to the risk would undoubtedly have been negligent.

I have come to the clear conclusion, when dealing with the facts above, that Mr Winfield did not advise TH about the risk of entering into a contract in this form and TH did not accept that risk. It follows that the allegation of a breach of duty in respect of the drafting of the First Contract is established.

In considering the allegation of delay in relation to the landlords’ consents, I have to bear in mind that excessive activity in the early part of a transaction could lead to wasted costs if the contract of sale is not agreed. Whilst it is a counsel of perfection to ensure that consent in principle has been obtained before exchange, it may be justifiable, depending on the circumstances, to exchange contracts without an express indication of consent. It does not seem to me to be possible to lay down any general rule as to how far the process of obtaining the landlord’s consent should have progressed before exchange of contracts.

What is clear however is that, having exchanged contracts with terms which included clause 4.6, it was essential for Mr Winfield to keep a close watch on the application for landlords’ consents, and in particular to ensure that the application was being progressed in full knowledge of the landlords’ requirements.

Mr Leech invited me to consider this allegation of negligent delay in relation to a number of periods. This is a convenient analysis, but I should not lose sight of the fact that it is the entire period which is in issue. Inactivity in one period may make it more important to use expedition in the next; equally if all the ducks are in place early on, nothing requires to be done later.

In the first period, 28^th April 2000 to 30^th June 2000, Mr Leech submits that no criticism can be made of Mr Winfield because TH was not looking to Mr Winfield to send the application form to ISL or to collect references or supporting financial information. They had entrusted this task to Mr Robinson, or alternatively were co-ordinating it themselves. I agree that in respect of this early period there is no culpable delay on the part of Mr Winfield, although the scene was being set for the later problems. Mr Winfield advised in the letter of 12^th June 2000 what he believed Mr Robinson to have done as between Wellington and ISL, and that the more that could be done as between the Rowell Charter landlords and ISL the better. TH were indeed pursuing these matters and knew what had to be done. When Mr Winfield received the letter of 26^th June from Sydney Phillips, he moved things along by transmitting it to Meade King.

The second period, 1^st July 2000 to 4^th September 2000 spans the exchange of contracts on 19^th July 2000.

So far as Wellington were concerned, Mr Winfield was assured by Meade King in the course of July that the application to the landlords had been made. It was not until 4^th September that TH told him that it had not. Mr Winfield could have insisted that the references and other documents be passed through him, but there was no reason, given what he was being told, for him to insist on this more circuitous course. I do not think that, so far as Wellington are concerned, Mr Winfield’s attention to the obtaining of the landlords’ consent fell below that which the law requires.

So far as the Rowell Charter is concerned, Mr Winfield had put Meade King in direct contact with the landlords’ agents at the beginning of the period, but did not send the letter from Mylles & Co dated 5^th July to Meade King. Although their letters crossed, Mr Winfield had been asking Mylles & Co for details of references required, presumably so that these could be passed on to ISL or their solicitors. Mylles & Co’s letter set out those requirements and in addition specifically asked for the need for guarantees to be brought to the assignees’ attention. This was not done until 25^th September 2000, some four days before the original completion date.

Mr Leech submitted that, the question of guarantees apart, no purpose would have been served at that stage by sending the Mylles & Co letter to Meade King and that therefore Mr Winfield was justified in not doing so. He had already asked Meade King to communicate directly with the agents. Moreover the requested costs undertaking had not been given by his clients, so Mylles & Co would have done nothing.

In my judgment it was a breach of duty not to send the Mylles & Co letter to ISL or their solicitors when it was received. The receipt of the letter by Mr Winfield ought to have alerted him to a potential problem which needed to be ironed out between the parties. Sending it to Meade King was a necessary step for that purpose. It would also have ensured that the assignees were fully aware of what was required of them by the landlords in a way that merely putting them in touch with the agents could not have done. The letter also, in my judgment, started the clock ticking for the giving of the costs undertaking to Mylles & Co. Mr Winfield should have pressed his client for the authority to give this undertaking in order to get the wheels moving at the latest by exchange of contracts on 19^th July. It is no answer to say it was not returned at the first time of asking.

The third period for consideration is 5^th September 2000 to 29^th September 2000. This period spans the original completion date. Mr Winfield was specifically instructed by TH at the beginning that ISL were dragging their feet and asked Mr Winfield to assist by speeding things up. Mr Winfield responded by chasing Meade King, which appeared at first to be producing results. He did not, however, even at this stage, provide Mylles & Co’s letter to Meade King. Moreover, in the light of the conflicting signals he had been receiving about the progress of the application to Wellington, Mr Winfield should now have insisted that the references and other documents be copied to him. If he did not he had no way of policing ISL’s obligation to assist in the process of obtaining the landlord’s consent, or of ensuring that the application was submitted in good time. Whilst the period between 6^th September (when Mr Winfield chased Meade King) and the 25^th September (when he faxed the Mylles & Co letter direct to Mr Patel of ISL) may not seem very long, it was at a vital stage of the transaction.

Moreover it was in my judgment a breach of duty for Mr Winfield not by this stage to have made any contact with Wellington’s solicitors. Mr Winfield’s evidence was that some three weeks could be needed to agree the formal licence once consent in principle was obtained. Even if he believed that there was no problem with consent in principle (which there plainly would be) he should during this period at the latest have opened communications with Gosschalks. He did not. If he had done it would have provided a further means of monitoring what ISL and its solicitors were actually doing.

The fourth period is 29^th September to 22^nd November 2000. This period spans the latest possible date for completion of 13^th November. Mr Leech submits that during this period Mr Winfield was justified in holding back as the client was in discussion with Churchill. I do not accept this. It is clear that TH regarded Churchill as a second option if ISL failed to complete. But this did not absolve Mr Winfield of the obligation of trying to place ISL in a position in which it had to complete. Indeed this is what Mr Winfield was trying to do by approving the draft licences to assign received from Gosschalks and forwarding them to Meade King. It is here that the failure to spot the conflict between the requirements of the landlord and the requirements of the assignee had its effect.

The final period is 22^nd November 2000 to 21 January 2001 and relates to the Rowell Charter. Mr Leech relies here on Meade King’s letter of 16^th January in which they say that the information needed by the landlords was the same as for Criterion and had been passed on to TH or their agents. I think the effect of this letter is negated by their subsequent letter a week later in which they said they had “now” despatched to the landlord’s solicitors the remaining information required by them.

I conclude that there were breaches of duty by Mr Winfield in not communicating the letter of 5^th July to the assignee or their solicitors sufficiently early for it to be acted on, not insisting on copies of the relevant applications to the landlords to be provided to him and not pursuing communication with the solicitors for either landlord until it was too late. The need to do these things was particularly acute in view of the form in which the contract had been drafted.

The main factual dispute under this head is whether there was an agreement between the parties that TH would be responsible for the dilapidations. If so, then it would have been clear where liability for the dilapidations fell, and there would be no need for Mr Winfield to give any special advice.

The telephone note in May 2000 does not record an agreement. Other evidence suggests that, at the time, Mr Winfield did not believe that any such agreement existed. For example when he sent the schedule to Meade King he said “Obviously your client will be required as interim tenant to take over the fulfilment of these works”. I was not persuaded by Mr Winfield’s explanation that this was (on this hypothesis) a somewhat disingenuous attempt to transfer the obligations to ISL despite the agreement. I was also struck by the absence of any reference to the agreement in Mr Winfield’s letter of advice of 14^th November 2000, when he had been specifically asked about the position by Mr Dudgeon. I have therefore come to the conclusion that there was no such agreement.

The next question, therefore, is who was responsible under the Contract for carrying out the work on the dilapidations. Mr Leech submitted that it was TH in any event. He draws attention to clause 15:

This was not an argument which had occurred to Mr Winfield, even by the date of his witness statement in this action which expressly recognises that there was nothing in the contract which did require the vendor to pay for dilapidations for which it was liable to the landlord under the leases. I think Mr Head is right when he submits that “Vendor’s Liabilities” does not include vendor’s liabilities for breaches of covenant under the lease.

In my judgment there was a breach of duty by Mr Winfield in failing to advise as to the incidence of liability for dilapidations. He should have advised TH that they were entitled to dispute the incidence of liability for dilapidations, which he did not do.

Mr Head submits that, if Mr Winfield had advised TH with proper care, TH and ISL would have:

concluded the First Contract with terms similar to the second contract, that is to say requiring ISL and/or Archers Ales to give a director’s guarantee if required;

licences to assign would have been completed prior to the original completion date of 29^th September;

there would have been no retention of £50,000 in January 2001;

TH could and would have repaid its debts, ceased its business and wound down to a cash shell soon after 29^th September 2000.

Mr Leech submitted that because the claimant’s loss depended on the hypothetical actions of third parties, this was a loss of a chance case, and that I should therefore apply the principles laid down by the Court of Appeal in Allied Maples v Simmons & Simmons [1995] 1 WLR 1602. That would require me to consider first, on the balance of probabilities, how TH would have acted. I should then consider whether TH had established that there was a real and substantial (as opposed to a speculative) chance that the third parties would have acted so as to confer the benefit in question. If so, then as part of the assessment of damages I should evaluate the percentage chance.

Mr Head submitted that, whilst the loss of a chance principle was a useful tool in some cases, in the present case the relevant evidence of how the third parties would have behaved is available. He points to the evidence of how the relevant terms were amended for the purposes of the Second Contract and how ISL/AAL were persuaded to give the guarantees.

I reject Mr Head’s submission. The loss of a chance principle is not, as it seems to me, simply a judicial tool to aid with difficult questions of causation or assessment of damages. The principle has a very significant effect on both the recoverability of and assessment of damages. In principle, therefore, its application ought to depend on the nature of the loss claimed rather than the evidence which happens to be called. Be that as it may, in the present case, the fact that there is some evidence of how the parties behaved at a later stage and in relation to a different contract does not mean that I should approach the issues on the basis of the balance of probabilities. The loss which the claimant alleges is the loss of a contract with different terms at an earlier date, which depends on the extent to which ISL would have been prepared to enter into that contract and at that time. There is no evidence from ISL on that question.

In 4 Eng Ltd v Harper [2008] EWHC 915 (Ch); [2009] Ch 91 David Richards J had to consider a similar question in a case where the claimant sought damages for deceit arising out of the sale to it of the shares of a company. Part of the loss claimed was that, but for the deceit, the claimant would have bought another company and had lost the chance to earn from the ownership of that company. It was submitted that where the company called the third party as a witness, the court could assess the likelihood that the third party would have acted as the claimant contends, and could decide the case on the balance of probabilities. David Richards J rejected that argument on the basis that not all the evidence relevant to the loss of a chance had been called, for example the evidence of solicitors and accountants and others who worked in the third party business. Moreover he declined to express a view as to whether it was correct in principle that, had such evidence been called, the balance of probabilities was the correct test to apply.

In the present case it is plain that all the evidence relevant to the ISL’s decision to complete an alternative contract has not been called. Accordingly I shall apply the Allied Maples approach.

If Mr Winfield had not been in breach of duty, then I think it is clear that TH would have done two important things of relevance here. Firstly they would have instructed Mr Winfield to take a tough negotiating position in relation to clause 4.6 and the provision of a guarantee. Secondly they would have sought to maintain the earliest possible completion date. Those matters, concerning as they do the actions of the claimant, have to be and are established on the balance of probabilities.

Is there a real and substantial chance that ISL would have agreed to a contract in which they were required to proffer a guarantee? It certainly seems that they would have resisted it, at least initially, given that they were not prepared to budge on the rent deposit. On the other hand, it seems to me that they would have been reluctant to lose the purchase altogether, and as their later conduct shows, directors’ guarantees were not something that ISL ruled out in all circumstances. It follows that I do not consider that it is mere speculation that the contract would have been exchanged with a requirement for a director’s guarantee, if requested by the landlord, particularly as they later agreed to a term of this general kind.

So far as the completion date is concerned, I think the evidence does show that ISL were dragging their feet in relation to this transaction. It is tolerably clear from the limited material available that ISL did not have finance in place until late October at the earliest. Mr Head points to an attendance note of Mr Winfield dated 16^th June 2000 which contains the words “offer Thursday/ Anglo Irish”, but this is a sadly deficient basis on which to speculate, let alone conclude that funding was in place. Moreover, whilst doing their best through Meade King to give the impression that they were supplying information to the landlords, it seems that in fact they were doing as little as possible.

For those reasons I do not think there was any real chance that ISL would have completed on 29^th September 2000, even in the absence of any negligence. Neither funding nor landlords’ consents would have been in place, through no fault of Mr Winfield. However, by the end of October 2000 it does seem that ISL were getting closer to a position where they had finance available, and the landlords’ consents, subject to a little negotiation, were in place at least for the Wellington pubs. By that stage the chance had become a substantial one.

Although there are multiple contingencies (agreement to the terms, attempts to re-negotiate or extend completion and so on) I think it would be wrong to apply percentage upon percentage. For example if I thought there was a 20% chance of ISL agreeing to provide the director’s guarantee as a requirement of the contract and an 80% chance of completion occurring at the end of October, a simple multiple of these two percentages (to yield 16%) would not reflect the true chances of the deal being done. That is because the contingencies are not independent. ISL might well have resisted the guarantee so as to prevent exchange of contracts until much later, and then agreed to it when their funding was in place. Or they might have agreed to it at once but with a longer completion date.

I think it right to ask what were the overall chances that TH and ISL would, absent negligence, have negotiated and agreed a contract for the sale for all five pubs, on terms requiring a guarantee, with completion occurring at the end of October 2000? I choose that date because that is the end of the postponement period under the First Contract. The following seem to me to be important factors;

By the end of October TH should have been in a fairly strong negotiating position;

Nevertheless their anxiety to rid themselves of the pubs would have made and did make them susceptible to bargaining by ISL;

ISL were clearly commercially interested in deferring the purchases and would have sought to negotiate;

The window between the availability of finance to ISL and the expiry of the first contract was a small one, a point which ISL would be able to exploit.

I would evaluate the overall chances of a completion at the end of October as 50%. As the damages have been calculated on the basis of the original completion date I will have to make a further reduction to the overall figure in due course.

If Mr Winfield had advised TH as to the principles of liability for dilapidations, TH would have had the opportunity to resist the incidence, and not merely the quantum, of those sums. This raises the question of what would have been done by TH, and whether ISL would have agreed to waive the retention. It is another loss of a chance.

When Mr Dudgeon was asked in cross-examination what he would have done if he had been advised that he could take this point he replied:

His re-examination went like this:

Mr Leech submits that this is fatal to the claim for the retention. I do not agree. Mr Dudgeon was saying that the point would have been raised, his uncertainty related to the firmness with which it would have been pursued.

I think the likelihood is that a compromise would have been reached. I value the chances of avoiding the £50,000 retention at 40%.

EMW also contend that the delay was in part due to the neglect of Tom Hoskins. They were experienced in the process of obtaining landlords’ consents, and the delay in obtaining it was in part due to their own neglect. I reject this defence. The defence was principally based on the suggestion that what was stated in Meade King’s letter of the 16^th January 2001 was correct and that TH had the relevant material all along. I do not think in the end that the evidence justifies this conclusion. There was no contributory negligence on the part of TH.

TH claim that the negligence of EMW directly caused them to be unable to close their operations and stem their trading losses. EMW say that losses of this nature are not recoverable in law.

EMW rely on the decision of the Court of Appeal in Galoo v Bright Grahame Murray [1994] 1 WLR 1360. The claim in that case was against auditors of a company for producing accounts which failed to show the insolvency of the company. The claimants were, effectively, the purchaser of shares in the company and the company itself. The allegation was that if the auditors had exercised reasonable care, the company would have ceased to trade and subsequent trading losses which it incurred would have been saved. The Court of Appeal said that the appropriate test to answer the question whether a breach of duty caused a loss is the application of common sense. By applying that test it held that the breach to duty gave the opportunity for the company to sustain the trading loss but did not cause it.

At first instance the Deputy Judge had held, in striking out the head of damages relevant to trading losses:

That passage, which the Court of Appeal approved, repeatedly stresses the phrase “trading losses as such”, and makes the point that there may be many other causes for such losses which it may be necessary to analyse.

In the Court of Appeal Glidewell LJ cites from two Australian cases. In one of these Alexander v Cambridge Credit Corporation Ltd (1987) 9 N.S.W.L.R. 310 the Court of Appeal of New South Wales had been divided over an issue of causation. Auditors had failed to qualify accounts in a way which would have led to the company being put into receivership and ceasing to trade. Glass J.A.. and McHugh J.A. had reached diametrically opposite conclusions, which Glidewell LJ noted showed that “not all judges regard common sense as driving in the same direction”. He also cites with apparent approval from Mahoney J’s more analytical judgment where he says this:

What that passage shows is that a claimant may fail to recover for damages described compendiously as trading losses if it fails to distinguish between those losses which are genuinely caused by a breach of duty and those which are not. That, as it seems to me, is entirely consistent with the approach taken by the Deputy Judge. In those circumstances it is not necessary to regard the decision in Galoo as holding that trading losses can in no circumstances be recoverable in law. Beyond that, as Carnwarth J said about that decision in the BRDC case (see below), Galoo, was an application of their common sense to the particular facts of that transaction.

EMW contend that the trading losses were not foreseeable and were not within the scope of Mr Winfield’s duty.

Mr Watson was not very specific as to the information which he gave Mr Winfield as to the reasoning behind the sell-off of TH’s estate. It is clear that Mr Winfield knew that the disposals were urgent, and that TH was under pressure from its bank to reduce its borrowings. Mr Winfield nevertheless disputed that he knew until very late in the day that TH was trading at a loss.

On this aspect I prefer Mr Winfield’s evidence. Mr Winfield had neither the opportunity nor the duty to enquire into the profitability of the TH business. He was certainly given no information about it. Whilst he had every reason to suppose that TH was overstretched financially, he had no access to their books and records, and no specific instructions one way or the other. But that, as it seems to me, is not the end of the matter.

In the valuation case, South Australia Asset Management Corporation v York Montague Ltd [1997] AC 191 Lord Hoffman said at 212 E-F:

In British Racing Drivers’ Club v Hextall Erskine & Co [1996] PNLR 523, the claimants received negligent advice in relation to the need to obtain their members’ approval before entering into an agreement to purchase shares in a third party. The advice given was that no such approval was necessary, when in fact approval was required under section 320 of the Companies Act 1985. The shares were purchased at an overvalue. The claimants sought to recover from the solicitors, amongst other damages, the amount overpaid for the shares. The principal argument against recovery was that this element of the loss was caused by the directors’ commercial misjudgment, not by the solicitors’ negligence. Carnwarth J (as he then was) held that these sums were recoverable. At page 539 F and later at 540G he said this:

A powerful factor in that case was undoubtedly the close connection between the purpose for which the advice was given and the risk to which the claimant had been exposed as a consequence of the advice being wrong. On the other hand it was a case in which there was a very plausible alternative candidate for the operative cause of the loss.

Mr Leech accepted that a solicitor in Mr Winfield’s position would normally expect to be responsible for a loss sustained in a property transaction due to a sale of the property at a lower price. Indeed he did not dispute that, if negligence were established, the lower price achieved on the Rowell Charter would be recoverable. That is because achieving the sale at the original contract price is plainly one of the primary purposes of the advice and assistance provided. The corollary is that the risk of failing to do so and achieving a sale at a lower price is something which would normally be regarded as within the risk against which the solicitor must protect the client. But Mr Leech argued that the trading losses were losses of a different kind, which a solicitor would not regard as within the scope of his responsibility. He referred me to the The Achilleas [2009] 1 AC 61 where Lord Hoffmann discussed the notion of the scope of the duty (in the context of contractual damages): see [12] to [20]. In particular he relied on this:

Mr Head submitted that Mr Winfield owed a duty to TH to consider and prevent the foreseeable consequences of any delay. Whether or not Mr Winfield actually turned his mind to or knew about TH’s or the individual pubs’ specific losses did not matter. The kind of commercial and financial losses in fact suffered by TH, a company disposing of its entire business, were entirely foreseeable.

I have come to the conclusion that the trading losses were caused by the negligence of EMW. The commercial context was one in which the business was under financial pressure, as Mr Winfield certainly knew. Whilst not inevitably making a loss, it was highly likely that it would be. The sale was of the pub businesses as going concerns, so there was no option of ceasing to trade. The purpose of Mr Winfield’s advice and assistance was not just to achieve a prompt completion for its own sake, but to achieve a completion of the sale of the entire business and thus prevent TH from being exposed to the risk of loss. Whether one looks at this question as a matter of common sense on the basis of Galoo, as a matter of foreseeability of type of loss, or as a matter of scope of duty, one arrives at the conclusion that it is loss for which EMW should properly be held liable.

I should add that Mr Leech was able to point to some matters in the accounts in respect of which it could be said that there was a more powerful case of alternative cause: such as a bad debt incurred in the relevant period. I do not think these examples are sufficient to divert me from the conclusion I have reached. I was also not persuaded by the suggestion that the loss was one sustained by TH’s creditors, or that the costs incurred by TH in obtaining additional finance were not justified. The negligence was an effective cause of all the losses.

Both sides called expert accounting witnesses to try and isolate the additional losses suffered by reason of TH continuing to trade. By the time of the trial the difference between the experts was not great. Mr Maclay on behalf of the TH put the losses at £209,000 and Ms Rawlin on behalf of EMW put them at £131,000, a difference of £78,000. I am awarding only 50% of the claim, so the respective figures are £104,000 and £65,000, a difference of £40,000. Moreover the losses are calculated by both accountants on the basis of 21 pub-months of trading. As I have delayed the notional completion date by one month, I will have to make a further deduction of six months leaving even less of a battleground between the two experts. In the light of the relatively small difference between these sums I propose to treat the disputes which divide the experts with a fairly broad brush.

The disputes which arose in relation to the pub trading losses, and my resolution of them are these:

Legal and professional fees: I consider that the sum allowed for by Mr Maclay of £5000 is too arbitrary to be justified. The evidence did not establish that the pubs incurred any legal costs.

Proportion of trading loss that relates to pubs sold late. The original approach was to treat all pubs on an equal basis and attribute a proportion of the total loss to the pubs sold late. On the basis of some rather imprecise evidence of Mr Dudgeon that one of the other pubs, the Lincolnshire Poacher, was making a profit, Mr Maclay adjusted this approach post hoc. I consider that the original approach was the fair and correct one, and should be maintained.

Pub Managers’ salaries: Ms Rawlin says that the figure for managers’ salaries looks too high. I accept Mr Dudgeon’s explanation that all that has happened is that some staff wages have been mis-allocated. I reject the adjustment suggested by Ms Rawlin.

Rowell Charter: TH claim a loss of £14,952 over a 2.5 month period. This was based on a calculation by Mr Dudgeon. The basis for this figure is too vague, and I am not satisfied that it is established. I have used instead the figure of £3959 suggested by Ms Rawlin.

In relation to Head Office costs:

Director’s salaries: Mr Humphrey would have had to stay on at least until November: so his salary and costs related to it should not be included.

Operations expenses: half the sum is attributable to running the pubs longer than needed.

Administrative salaries and National Insurance: I accept Ms Rawlin’s figure of £3000 as all that can be properly established here.

Recruitment costs: These should be subject to the original and not the modified multiplier.

Office Rent and Rates: The figure for 6 months is £6000. They could have avoided the January and February rent: say £2000.

Bank Loan charge: The evidence did not support £5000 of this charge.

Depreciation: I allow one third of the depreciation of £4845.

Accordingly the summary of the loss calculation looks like this:

On the conclusions I have arrived at TH are also entitled to the net retention for dilapidations times the percentage chance of avoiding that loss, together with the loss of sale proceeds on the Rowell Charter times the percentage chance of avoiding that loss. These are £40,000 x 40% and £25,000 x 50% or £28,500.

In the result I award TH the sums of (i) £72,083 for trading losses (ii) £28,500 for the retention and Rowell Charter claims. I will hear counsel as to the appropriate order to give effect to my judgment.