Maloney v Mundays LLP

On 29 July 2019 the Claimant, whom I will call Mr Maloney, issued

Very shortly before trial, Mundays admitted liability in relation to breaches of duty in tort, in terms which I shall record below. The trial therefore proceeded on the issues of causation and loss only. It was common ground that the contract claims were statute barred. As a result of the admission, Mr Harris and Ms Moss of Mundays were not cross examined, but their witness statements were tendered in evidence.

Mr Maloney brought his claim as assignee of a company called Maloneys Retail

From around 1997 until 2006 Mr Maloney was employed by Budgens Stores

Companies associated with Mr Maloney purchased a number of the divested stores. First, Maloneys purchased the Budgens store in Ascot in September

However in the case of the Ascot store, there was in existence in 2006 a planning permission for the development of part of the car park at the rear of the store (“the Development Land”). Mr Maloney’s evidence was that the existence of that planning permission was not taken into account when Budgens set the purchase price for the Ascot store, and that he was not interested in developing the Development Land at that time because the parking spaces were needed for

Maloneys and Budgens reached heads of terms by around December 2005 for the purchase of the Ascot store. The Heads of Terms provided for the sale of

“the Business, Goodwill, Property and all Fixtures and Fittings found at the Property and Stock and to transfer the liquor licence and all the employees employed in the Business”. The property was described as the land and buildings at Budgens Store, The Hermitage, High Street, Ascot, Berkshire SL5 7HD. The purchase price (which as explained above had been set by Budgens) was £2,140,000, to be apportioned as to £1,642,700 to the property, £497,299 to the fixtures and fittings and no value to goodwill. The apportionment was also dictated by Budgens. The purchaser was required to enter into a 10 year standard Budgens retailer agreement on the completion date. The Heads of Terms also provided for an option deed, described as follows:

“The Purchaser will be required to enter into a standard Option deed on the Completion Date whereby Purchaser to grant Vendor a 20 year option permitting Vendor to purchase the Business, Goodwill, Property and the Fixtures and Fittings if the Purchaser agrees to sell the Business or terminates or breaches the Budgens Retailer Agreement at the following price:

(a)

in the first to ninth years of the Option Period (provided the Purchaser has complied with the terms of the Budgens Retailer Agreement) at a price determined by the formula in the Option Deed;

(b)

in the tenth to twentieth years of the Option period, at the open market value.”

Finally, the Heads of Terms provided that development of the land at the rear of the store was not permitted without the written permission of Musgrave during the 20 year period, and that if permission was granted, 50% of the net proceeds of the development would be payable to Musgrave. Mr Maloney subsequently negotiated the period of the overage restrictions to 15 years (or so he thought).

Mundays were instructed to act for Maloneys in January 2006 and the letter of engagement was dated 18 January 2006.

In January 2006, Barclays, who were to and did lend to Maloneys, obtained a valuation from Jones Lang LaSalle (“the JLL valuation”). Barclays asked for a business valuation and a “bricks and mortar” valuation. JLL valued the business on the basis of a Fair Maintainable Operating Profit (“FMOP”) of £380,000 and a multiplier of 6, of which 0.5 was to account for the value of the Budgens franchise. This gave a value of £2.3m. JLL also gave what they described as a valuation on the assumption of vacant possession (i.e. the “bricks and mortar” valuation requested for the property unrestricted by the contracts to be entered into). They considered that the available rental of £210,000 per annum, which they capitalised at 5.5% (but with various assumptions as to voids and tenant’s incentive). This gave a value of £3.4m. However, on the basis of JLL’s understanding that Budgens would have a first right of refusal to purchase the property at the current purchase price of £2.2m for a period of 10 years, so that the £3.4m vacant possession value would not be realisable for a period of 10 years, they discounted the £3.4m at the same rate of 5.5% over the 10 years, giving a vacant possession valuation of £2m. Thus, the business value was lower than the unrestricted vacant possession value, but the vacant possession value had to be discounted because it could not be realised for 10 years.

The Ascot store was registered under title no BK281482. That title number comprised a store with a car park behind and part of the accessway from the car park to the public highway. On 30 January 2006 Mundays sent Mr Maloney a letter enclosing a copy plan, asking Mr Maloney to confirm that as far as he was aware this plan accurately showed the extent of the property which he was purchasing. The plan which it appears Mr Maloney was sent on that date was a copy of the Land Registry plan for title no BK281482 at that time. Mr Maloney gave that confirmation, and his evidence was that he had visited the Ascot store

Mundays then provided a report on title to Mr Maloney at a meeting between Mr Harris of Mundays and Mr Maloney on 15 June 2006. Contracts were exchanged on 16 June 2006, being a business sale agreement (“the Business Sale Agreement”) incorporating the contract for sale of the Ascot store.

The transaction was completed on 6 September 2006. On that date Maloneys entered into a number of documents of which the following are relevant:

The TP1 contained a plan (“the Transfer Plan”) which showed that instead of transferring the whole of title no BK281482, Budgens retained a small part, which was coloured blue on the Transfer Plan (“the Retained Land”). The Retained Land is situated at the point where the exit lane of the accessway from the rear car park joined Ascot High Street and extends across the whole of the exit lane. The Development Land was shown edged in green. Clause 13 of the TP1 relevantly provided as follows:

“13.1

In this Transfer unless the context otherwise requires:

“Budgens Store” means the Budgens supermarket at The Hermitage, High Street, Ascot, Berkshire, SL5 7HD

…..

13.3

The Property is transferred together with a right of access in common with the Transferor over the Retained Land with or without vehicles to obtain access to or egress from the Budgens Store situated on the Property.

13.4.

The parties hereby agree and declare that the Transferor is not entitled to any right or easement over the Retained Land other than those specifically granted by this Transfer and accordingly section 62 of the Law of Property Act 1925 does not apply to this Transfer.

13.5

The Transferee with intent to bind the Property and each and every part of it covenants on behalf of itself and the Transferee’s Successors with the Transferor for the benefit of the Retained Land and each and every part of it not to commence any development of the Car Park unless the conditions below have been complied with:

13.5.1

the turnover of the Budgens Store had declined by 35 per cent as evidenced by comparing the business plan of the Budgens Store at the date of this Transfer and the business plan of the Budgens Store at the date of the proposed development; and

13.5.2

the Transferor or the Transferor’ Successors have given their prior consent to the development.”

The TP1 also provided for a restriction requiring a certificate that the provisions of the Overage Deed had been complied with.

Eventually, the property transferred to Maloneys was registered under a new title, while the Retained Land continued to be registered under title no BK281482. I say eventually because there was a great deal of later activity before the TP1 was properly registered, but since nothing turns on this and it is common ground that Mr Maloney and Maloneys knew nothing of this, I say no more about these matters.

It is now common ground that Mr Maloney and Maloneys did not know until 2017 that Maloneys had not purchased the whole of the land which was formerly comprised in title no BK281482.

It is worth also recording here that only half of the accessway between the main road and the car park at the rear of the supermarket, that half used for the exit, was ever owned by Budgens and included in title no BK281482. The other half, the half used for vehicles to enter, was unregistered land which had been used for many years without objection, and there existed some form of insurance to cover contingencies in relation to the unregistered accessway.

Following completion, Mundays submitted to HMRC a form SDLT1 which

Maloneys then ran the Ascot store for some years. In March 2015 there was an approach from a third party to purchase the Ascot store, but since the 10 year period under the Retailer Agreement had not expired, it was not progressed. By mid 2015, sales at the Ascot, Shepperton and Wentworth stores were all declining. The Shepperton store had a particularly uncertain economic future and Musgrave agreed that Mr Maloney could market it. Discussions took place about an early release of the Shepperton store from the relevant retailer agreement in exchange for the payment of money, and an extension of the retailer agreements for the Ascot and Wentworth stores. The payment was not acceptable to Mr Maloney. However, Musgrave was then acquired by Booker

By December 2016, there were in existence heads of terms for an arrangement whereby on the one hand new retailer agreements would be entered into in respect of the Ascot store, extending the period by 18 months to May 2018, and the Wentworth store, extending the period by 2 years to March 2020, and on the other hand the Wentworth and Ascot stores would be released from all other agreements including the Overage Deed and the Option Deed. Separately, the same heads of terms provided for the sale of the Shepperton store. Drafts of a deed of termination for the Option Deed and the Overage Deed for the Ascot store were received on 23 February 2017. On 1 June 2017 Booker told Mr Maloney that Budgens had retained the Retained Land and that the Shepperton sale could not go ahead until this was sorted out. Mr Maloney’s unchallenged evidence was that by this time he had lost touch with any Musgrave board members and remaining Musgrave employees had left Booker, so that he could not go back to anyone he had known within Musgrave to clarify what had happened in 2006. Mr Maloney’s companies were by now under serious

On 7 June 2017 Mr Maloney met Mundays. Following that meeting, Mr Partridge of Mundays wrote to Mr Maloney saying that he was not in a position to comment any further about the Retained Land or the 2006 transaction relating to Ascot, and suggesting that Maloneys take separate legal advice.

On 9 June 2017 Mr Maloney agreed by telephone with Booker that the Shepperton sale and the extension of the Wentworth retail agreement could proceed, and that Ascot would be left to one side for the time being. Mr

In December 2017 Mr Maloney received an offer of £5.3m for the shares in Maloneys and £1.5m for the Wentworth store, with a contingency to cover arrangements with Booker up to £1m for purchase of the Retained Land and the early determination of the retailer agreement for the Wentworth store, plus an additional £200,000 if Mundays were liable for the Retained Land so that the cost of purchasing it did not fall to the purchaser. Mr Maloney also received other offers from Sainsbury’s and Marks and Spencer, and told Booker in December 2017 that all offers were conditional on the Retained Land being included in the sale.

In January 2018 Booker informed Maloneys that they required £1.25m for the Retained Land, and Mr Maloney then instructed Gordons Solicitors Limited to act for him.

In May 2018 the incorrect payment to HMRC in respect of stamp duty was discovered, and Maloneys duly reported the mistake to HMRC.

Negotiations then continued between Maloneys and Booker. Booker reduced the price for the Retained Land from £1.25m to £800,000. However in the course of that negotiation Booker initially demanded additional consideration for the Retained Land on top of the £800,000, either part of any damages obtained from Mundays, or an increased price if the onward sale of the Ascot Store was for more than £5m. Eventually Booker dropped their price for the Retained Land to a single payment of £800,000 even if a price above £5m was obtained for the Ascot store or damages were obtained from Mundays.

Mr Maloney received an offer in March 2018 from one party (not the eventual purchaser) for the purchase of the Ascot store for £4.6m plus £800,000 if the

Also on 30 November 2018, Maloneys assigned its claims against Mundays to

The underpayment of SDLT from 2006 in the sum of £40,000 and interest of

On 19 April 2021, a few day before trial, Reynolds Porter Chamberlain on behalf of Mundays wrote to Gordons on behalf of Mr Maloney admitting liability. The admission, made for the purpose of these proceedings only, was helpfully set out in an agreed list of issues provided by Counsel before closing submissions, namely that in breach of its tortious duty of care:

“A.

The Defendant failed to advise [Maloneys] prior to its exchange (or completion) of contracts with Budgens that an area of land was to be retained from that included in title BK281482 (the Retained Land) and of the location of the Retained Land; and that Maloneys did not discover the fact that the land had been retained until 2017 (“the Retained Land Breach”);

B.

The Defendant submitted the SDLT1 with the purchase price understated by £1,000,000 (“the SDLT Breach).”

It was also admitted that in relation to both breaches the tortious claim was not statute barred because Maloneys could avail themselves of section 14A of the Limitation Act 1980.

There were both agreements and disputes between the parties about the meaning of the Budgens Agreements and the TP1.

It was common ground that:

These issues were not identified on the pleadings but they affect the valuation evidence. Accordingly, both parties agreed that I needed to determine these issues.

I also heard argument about whether the restrictive covenant contained in the TP1 which provided for yet another different restriction on the development of the Development Land (“the Restrictive Covenant”) was enforceable against successors in title to Maloneys. However, since it was agreed by both parties that the Right of Way did not permit access to the Development Land, an additional restriction on development of the Development Land would make no difference to the value of the property. Moreover, by the end of the hearing, the parties and the experts were in agreement that the hope value of the

I was referred to a judgment of Professor Andrew Burrows Q.C., sitting as a deputy Judge of the High Court, in Federal Republic of Nigeria v JP MorganChase Bank [2019] EWHC 347, which set out the well known principles relating to construction of documents at paragraph 32:

“ I have elsewhere summarised the modern approach in English law to contractual interpretation: see, eg, Greenhouse v Paysafe Financial Services Ltd [2018] EWHC 3296 (Comm) at [11]. The modern approach is to ascertain the meaning of the words used by applying an objective and contextual approach. One must ask what the term, viewed in the light of the whole contract, would mean to a reasonable person having all the relevant background knowledge reasonably available to the parties at the time the contract was made (excluding the previous negotiations of the parties and their declarations of subjective intent). Business common sense and the purpose of the term (which appear to be very similar ideas) may also be relevant. But the words used by the parties are of primary importance so that one must be careful to avoid placing too much weight on business common sense or purpose at the expense of the words used; and one must be astute not to rewrite the contract so as to protect one of the parties from having entered into a bad bargain. Important cases of the House of Lords and Supreme Court articulating the modern approach include Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, HL, especially at 912-913 (per Lord Hoffmann giving the leading speech), Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900, Arnold v Britton [2015] UKSC 36, [2015] AC 1619, and Wood v Capita Insurance Services Ltd [2017] UKSC 24, [2017] AC 1173.”

The Option Deed relevantly provides as follows:

It is fair to say that the Budgens Agreements are difficult to understand, and that they do not hang well together – for example there is a 15 year period for the restrictions on development of the Development Land applied by the Overage Agreement, while there is a 20 year restriction on development of the Development Land in the Business Sale Agreement.

Applying the principles set out above, I first consider the price at which Budgens could acquire the property. In my view the clear words of the Option

Mrs Galley was not able to offer any compelling argument by reference to any of the matters referred to in Nigeria v JP Morgan as to why the Option Deed permitted Maloneys to require Budgens to acquire the Business, Premises and Assets at the open market price for the Premises without the Business after the end of the Retailer Agreement. She referred to the construction put forward by Mr Liddell being exceptionally unfair. She also submitted that it was absurd for the Market Value to be determined by reference to the store’s value as a Budgens business after the Retailer Agreement had been terminated. However, the background to the Option Deed included the significant investment in the Business, the Premises and the Assets by Budgens and the significant financial, trading and commercial assistance provided by Budgens to Maloneys (as specifically referred to in clause 2.1). Both Budgens and Maloneys knew that Budgens was intending to switch to a wholesale role and therefore had a strong interest in retaining the property as a Budgens store. The business plan which was prepared by Budgens included a 25 year forecast. Further, the Option Deed permitted Budgens to require any purchaser from Maloneys to enter into a new Retailer Agreement and a new Option Deed, so that again the store would continue to operate as a Budgens even after a sale to a third party. There were competing interests of Budgens and Maloneys in relation to the price at which

Taking all these factors and the words of the agreement together, I therefore find that in fact the right of pre-emption allowed Budgens to purchase the Business, Assets and Premises for the market value of the Business, Assets and Premises in the second 10 year period of the Option Deed if the Retailer Agreement had been terminated.

In relation to the Option, clause 6.1 provided that the Option could be exercised by Budgens at any time after the Retailer Agreement had been terminated, provided that it could only be exercised once in the Option Period. Mrs Galley submitted that no period was provided for the exercise of the Option, but that is not correct; the period is expressed to be any time after the Retailer Agreement had ended, provided it was within the Option Period. Mrs Galley also submitted that this would permit Budgens to exercise the Option up to10 years after the

As to the price at which the Option could be exercised, in the second 10 years of the Option Period, the Option Deed provides that the price would be the price agreed between the parties or in default of agreement, the price determined by an expert on the basis that the Business, the Assets and the Premises are sold at Market Value. For the same reasons as set out above, I find that this again permitted Budgens to purchase the Business, the Premises and the Assets at the market value for a Budgens supermarket with the benefit and burden of the Retailer Agreement.

In relation to the Right of Way, the relevant provisions are set out in paragraph 14 above. The essential dispute between the parties was whether “to obtain access to or egress from the Budgens Store situated on the Property” meant access or egress to the store which happened to be a Budgens supermarket at the time of the TP1, or whether it meant access or egress to the Budgens store only while it was a Budgens store.

In my view the Right of Way permitted access and egress to and from the store while it was used as a Budgens store and not otherwise. Mr Liddell submitted that “Budgens store” is merely convenient shorthand for “the store which is where Budgens is at the date of this transfer”. But “Budgens store” is defined as “the Budgens supermarket at The Hermitage, High Street, Ascot”. “Budgens

At the very least, a purchaser of the property from Maloneys was likely to consider that there was an argument that the Right of Way was only for the purpose of use of the store as a Budgens supermarket. Indeed, Mr Liddell accepted that a properly advised purchaser would be told that it might be argued that the Right of Way was restricted to use as a Budgens supermarket (although he also submitted that the right advice would be that the point was unlikely to arise and in any event did not affect the property for at least the first 10 years while it was being used as a Budgens store).

The first agreed issue was whether, but for the Retained Land Breach, Maloneys would have (i) completed in any event at the agreed price of £2,140,000, or (ii)

Neither party contended that Maloneys would have withdrawn wholly from the transaction.

Mr Liddell submitted that Mr Maloney’s expertise was in food retailing and not in property investment or development. He pointed out that Mr Maloney had worked for Budgens since 1997, and was in 2006 their Sales Director, and that Mr Maloney obviously felt confident in the Budgens brand and business because he purchased a number of stores. Accordingly, he said, if Mr Maloney had been informed, prior to exchange (or completion) of contracts with Budgens, that the Retained Land was to be retained out of title BK28142 and of the location of the Retained Land, Mr Maloney would have gone ahead in any event.

Mr Maloney’s firm evidence under cross examination was that if he had been told about the Retained Land before contract, he would have insisted either on the Retained Land being included, or on a reduction in price. I accept that evidence. In my judgment Mr Maloney was a straightforward and honest witness who did his best to assist the court, and Mr Liddell expressly disavowed any suggestion that Mr Maloney was misleading the court. Mr Maloney’s evidence was that he was particularly interested in Ascot because it was a freehold site. He accepted that he was not interested in the Development Land at the time because the store was doing well on turnover, but on the other hand he did negotiate the Overage Deed down to 15 years. He explained that his understanding at the time, based on Mundays’ advice in the report on title, was

Accordingly I find that Maloneys would have insisted that the Retained Land be included in the sale to them. Indeed, Mr Liddell accepted that he could not discount the fact that Mr Maloney would have questioned the exclusion if it had been brought to his attention.

But would Budgens have included the Retained Land, or reduced the price? No evidence was called from a witness who was a decision maker in 2006 for Budgens, unsurprisingly given the length of time which has elapsed.

Accordingly I find that but for the Retained Land Breach, Maloneys would have insisted on the Retained Land being included and the Retained Land would have been included in the transfer to Maloneys.

The next issue is the basis on which any loss should be assessed.

The agreed list of issues read as follows:

“1(b)(i) What loss, if any, has been caused to Maloneys and what loss, if any is [Maloneys] entitled to recover; and should it be assessed:

(i)

as the difference in value, if any, between the price paid by Maloneys for the Business Property and Assets (£2,140,000) and the value of the same without the Retained Land as at 2006; or

(ii)

[Claimant’ proposed wording]: as the cost to [Maloneys] of putting itself in the position it would have been in had the Retained land been transferred to it][Defendant’s proposed wording]: as the cost incurred to acquire the Retained land in 2018”.

A footnote stated: “NOTE: for the avoidance of doubt, the Defendants’ position is that it is not open to the Claimant to contend that the correct measure of any loss is anything other than its pleaded position at Issue 1(b)(i) above.”

Mrs Galley referred me to County Personnel v Pulver [1987] 1 W.L.R. 916. In that case, the plaintiffs had entered into a lease in 1979 at a rack rent for premises which they intended to use for their business. The rent review clause was subject to an uncertainty about which the claimants were not advised by the defendant solicitors. In 1983 the plaintiffs attempted to sell the underlease and the goodwill of the business and received an offer for £17,000 but the sale fell through partly because of the uncertainty in the rent review clause. In 1984 the rent review provisions were exercised, leading to the rent being set at £9,000 odd when the rental value of the premises was some £2,600. The plaintiffs eventually surrendered the underlease but had to pay £16,000 plus a sum representing the increased rent from the date of the rent review. The plaintiffs claimed the sums paid on surrendering the underlease and the £17,000 lost on the prospective sale. The judge at first instance found that there was no negligence by the solicitor and dismissed the claim.

At page 925 of the report Bingham LJ, with whom Stephen Brown LJ agreed, said the following:

“The principles to be applied in assessing damages in this case are, in my judgment, these:

(1)

The overriding rule was stated by Lord Blackburn in Livingstone v. Rawyards Coal Co. (1880) 5 App.Cas. 25, 39, and has been repeated on countless occasions since: the measure of damages is "that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation." As Megaw L.J. added in Dodd Properties (Kent) Ltd. v. Canterbury City Council [1980] 1 W.L.R. 433, 451: "In any case of doubt, it is desirable that the judge, having decided provisionally as to the amount of damages, should, before finally deciding, consider whether the amount conforms with the requirement of Lord Blackburn's fundamental principle. If it appears not to conform, the judge should examine the question again to see whether the particular case falls within one of the exceptions of which Lord Blackburn gave examples, or whether he is obliged by some binding authority to arrive at a result which is inconsistent with the fundamental principle."

(2)

On the authorities as they stand the diminution in value rule appears almost always, if not always, to be appropriate where property is acquired following negligent advice by surveyors. Such cases as Philips v. Ward [1956] 1 W.L.R. 471; Pilkington v. Wood [1953] Ch. 770; Ford v. White & Co. [1964] 1 W.L.R. 885 and Perry v. Sidney Phillips & Son [1982] 1 W.L.R. 1297, lay down that rule and illustrate its application in cases involving both surveyors and solicitors.

(3)

That is not, however, an invariable approach, at least in claims against solicitors, and should not be mechanistically applied in circumstances where it may appear inappropriate. In Simple Simon Catering Ltd. v. Binstock Miller & Co. (1973) 228 E.G. 527 the Court of Appeal favoured a more general assessment, taking account of the "general expectation of loss." In other cases the cost of repair or reinstatement may provide the appropriate measure: the Dodd Properties case [1980] 1 W.L.R. 433, 456, per Donaldson L.J. In other cases the measure of damage may properly include the cost of making good the error of a negligent adviser: examples are found in Braid v. W. L. Highway & Sons (1964) 191 E.G. 433, and G. + K. Ladenbau (U.K.) Ltd. v. Crawley de Reya [1978] 1 W.L.R. 266.

(4)

While the general rule undoubtedly is that damages for tort or breach of contract are assessed as at the date of the breach (see, for example, Miliangos v. George Frank (Textiles) Ltd. [1976] A.C. 443, 468, per Lord Wilberforce), this rule also should not be mechanistically applied in circumstances where assessment at another date may more accurately reflect the overriding compensatory rule. The Dodd Properties case [1980] 1 W.L.R. 433, both affirms this principle and illustrates its application.

(5)

On the facts of the present case the diminution in value rule would involve a somewhat speculative and unreal valuation exercise intended to reflect the substantial negative value of this underlease. It would also seem likely to lead to a total claim well above the figure the plaintiffs claim. By contrast, there is firm evidence that £18,761 is what it actually cost the plaintiffs, as a result of an arm's length negotiation after expiry of the first five years of the underlease, to extricate themselves from the consequences of the negligent advice they had received. Unless (which seems unlikely) it can be shown that payment of this sum did not represent a reasonable attempt by the plaintiffs to mitigate the loss they had suffered, this figure would represent a fair assessment of one head of the loss.

(6)

Even after an appropriate measure has been found to reflect damage recoverable under the first limb of the rule in Hadley v. Baxendale (1854) 9 Exch. 341, there will be cases in which a plaintiff will not be adequately compensated unless he receives damages to reflect his loss under the second limb also. In claiming £17,000 for loss of its prospective sale of the lease and the goodwill of the business the plaintiffs advance the present as such a case. It must, however, be accepted on the findings of the deputy judge that if they had not been negligently advised the plaintiffs would not have entered into this underlease at all. This being so, damage cannot be assessed with reference to a specific gain which the plaintiffs could only have made if they had entered into this underlease, unless it be proper on the facts to conclude that properly advised, the plaintiffs would probably have been able to negotiate the grant of this underlease but without the offending clause. Even then the offer of £17,000 would call for closer scrutiny.

(7)

It may alternatively be proper to conclude when the facts are investigated that even if the plaintiffs, properly advised, would not have taken an underlease of 109, Queen Street, they would nonetheless have taken a lease of other premises from which to conduct their employment agency business. On their initial introduction to Mr. Cook, Mrs. Feldman and Mrs. Balfe were shown other premises in Maidenhead and it may be that they would have accepted the other premises had the Queen Street transaction fallen through. Had they done so and had the plaintiffs conducted their business from the other premises, it may be correct to infer that goodwill would have been established and (perhaps) a saleable lease obtained. But it would be proper to approach this assessment in a cautious and conservative manner: the premises chosen were clearly thought to be the more promising for purposes of the business it was proposed to conduct; it does not follow that the business could have been conducted as successfully from other premises; the value of the plaintiff company's potential goodwill would have to be looked at in the light of its accounts; there might be no prospect of obtaining a significant premium on sale of a lease at open market rent; and the speculative nature of the assessment should be borne in mind.

(8)

Any damages awarded would no doubt attract an award of interest in the usual way.”

Both Mrs Galley and Mr Liddell referred me to the judgment of Sir Nicholas

Mrs Galley and Mr Liddell both also referred me to a number of paragraphs from Jackson and Powell on Professional Liability, 8^th edition. Paragraph 11285 reads as follows:

“Where the purchaser’s solicitor errs in his advice he gives or in the investigations which he makes on the client’s behalf, the property purchased may prove to be less valuable than was assumed at the time of purchase. The normal measure of damages in such circumstances, as in the cases on surveyors’ negligence, is the amount by which the sum paid by the client exceeds the true value of the property at the date of purchase. For instance, in Wapshott v Davies Donovan & Co the Court of Appeal upheld an assessment of damages in relation to defective leases as the difference in value at purchase in 1986, and not when defects first became apparent in March 1988 when the plaintiffs tried to sell the premises. In the majority of cases, the courts are ready to accept that the purchase price represents the value of the property in the condition described by the solicitor. Where, however, the purchase price corresponds with the value of the property in its actual condition, then the purchaser suffers no loss and will be entitled to no more than nominal damages…….”

Paragraph 11-286 is headed “Exceptions to the rule, general statements” and

I was not taken to Reeves v Thrings & Long [1996] PNLR 265, or Oates vAnthony Pitman & Co [1998] PNLR 683 during the hearing, but I considered them following the hearing. I shall not burden this judgment further with citation from those two cases, which are accurately described in the extract from Jackson & Powell, supra.

Mr Liddell’s submission on behalf of the Defendant was that the immediate reaction of a non-lawyer if there was a breach was that if Maloneys thought it had the Retained Land but didn’t, then there must be a claim for damages; but

However, it is necessary to look at the whole of the pleadings, and indeed what was submitted for Mr Maloney. Having pleaded that the loss and damage suffered by Maloneys was the difference in value, paragraph 34(a) of the

The Defence then pleaded at paragraph 30 to paragraph 34(a) and the particulars thereof as follows:

Mundays also sought further information from Mr Maloney in relation to paragraph 34 of the Particulars of Claim, asking in particular about the negotiations for the purchase of the Retained Land, how much of the £800,000 was ascribed to the release of the Overage Deed, and all attempts by Maloneys to purchase the Retained Land for less than £800,000.

It seems to me that the case that the difference in value is best evidenced by the £800,000 paid in 2018 is fairly pleaded by Maloneys, and was fully pleaded to by Mundays, and that it is open to Mr Maloney to run that case. Of course, since Mundays had taken issue with the pleaded case, it was entirely sensible to call additional evidence in case the court determined that the loss had to be determined in 2006 rather than 2018, the date of purchase being the usual date at which damages are assessed. The order for expert evidence does not assist, being simply a permission to call expert evidence in the field of commercial/retail property to address issues relating to damages for breach of duty without specifying a date.

Mr Liddell suggested that Mundays were disadvantaged because had they appreciated that Mr Maloney was running a case that £800,000 was the difference in value Mundays might have wanted to call evidence from Booker. I cannot accept that Mundays were disadvantaged. The case being run was apparent on the pleadings as set out above, and even the expert evidence for Mr Maloney was suggesting a difference in value in 2006 of some £600,000, which with interest is likely to at least reach the same financial outcome as an award of £800,000 in 2018. Although Mr Liddell pointed to passages in Mrs Galley’s skeleton argument, that cannot possibly have affected a decision to call a witness from Booker. Moreover, Mr Liddell cross examined Mr Maloney on all the matters set out in paragraph 30 of the Defence, going to whether the £800,000 was evidence of difference in value.

Eventually Mr Liddell accepted in closing submissions that it was open to Mr

I shall turn therefore to consider the loss suffered by Maloneys on the basis that it is open to Mr Maloney to seek to establish that the best evidence of the difference in value between the value of the assets he purchased in 2006 with and without the Retained Land is the £800,000 paid by Maloneys in 2018.

Before considering the parties’ submissions, it is first necessary to consider the

The expert evidence was, as explained above, directed at the difference in value in 2006. The experts, as is so often the case, seemed somewhat at cross purposes in their reports, and made different assumptions. Mr Palos produced one report, and Mr Clarke produced a report and a supplemental report. There was also a joint statement setting out areas of agreement and disagreement. Both Mr Palos and Mr Clarke have substantial experience in the relevant fields, although Mrs Galley submitted that Mr Palos had the greater experience both in valuing businesses and in giving expert evidence. Mr Clarke accepted that valuing businesses has not been a major proportion of his work over the last few years, but said that he had done some valuing of businesses at the relevant period and throughout his career and knew what would concern people.

Mr Palos assumed that the Retained Land taken together with the Right of Way and the Restrictive Covenants prevented the development of the Development

Mr Palos then approached the question of the difference in value in three different ways in his report:

Mr Clarke took a different approach in his report. He assumed that the Right of Way was unrestricted. He considered that the appropriate multiplier for a food business in 2006 would have been in the range of 4-7. He considered that the JLL valuation based on a FMOP of £380,000 and a multiplier of 6 was appropriate on the basis of JLL’s assumptions, but also considered that in fact the restrictions in the Budgens Agreements were more restrictive than assumed by JLL, so that the actual purchase price of £2.14m was fair and reasonable given the extensive tie ins to Budgens, the control that Budgens had over the business and the property and the pre-emption rights. He pointed out that a key effect of the Budgens Agreements was that they enabled the property to be acquired by Maloneys at a price that was considerably less than the market value of the property in isolation and free from those considerations. Mr Clarke also considered that the JLL valuation of £3.4m for the property with vacant possession and free from the Budgens Agreements and excluding hope value for the development land was correct. He continues in paragraph 5.03.05 of his report “Therefore this figure of £3.4m is unaffected by the existence of the [Retained Land]”. This is because Mr Clarke was assuming that the only future use impeded by the Retained Land coupled with the Right of Way was the development of the Development Land.

Mr Clarke then went on in his report to consider the effect of hope value arising from the potential for residential development on the Development Land. Mr Clarke considered that in June 2006 the vacant possession value of the property unfettered by the Budgens Agreements was, as a result of that hope value, £3.88m if the Retained Land were included and £3.5m if the Retained Land were not included. This gives an uplift in value for the hope value of £480,000 over the £3.4m for the vacant possession value of the property if it included the Retained Land. He considered the value of the Retained Land as a ransom strip and concluded that it was not a perfect ransom strip in relation to the Development Land because it might be possible to purchase a small plot of land, similar in size to the Retained Land, on either side of the existing driveway and then to re-route the access around the Retained Land. Mr Clarke said that while it was not possible for him to evaluate the likelihood of a successful solution to the issues caused by the Retained Land, the possibility of such solution would tend to reduce the effect of those issues and strengthen the position of the purchaser in any future negotiation with Budgens. He also suggested that a ransom strip in compulsory purchase is usually valued between 33% and 50% of the uplift, but because the Retained Land was far from a perfect ransom strip, he would suggest it was worth no more than 20% of the uplift in value, or £96,000, which Mr Clarke rounded up to £100,000. However, he concluded that the effect of the Budgens Agreements was such that that they completely excluded any uplift for the development potential of the Development Land.

It will be seen that Mr Clarke and Mr Palos approached the task of valuation on completely different bases, primarily because Mr Clarke was not considering the possibility that the Right of Way was limited to access and egress for a Budgens store only, but also because Mr Palos did not consider that the ability to develop the Development Land had a significant effect on value in 2006.

Mr Clarke then provided a supplemental report on the basis of an assumption that the Right of Way was limited to access and egress from the store while it was a Budgens store only. Mr Clarke’s opinion as set out in the supplemental report was that:

Both experts agreed that the property market (but not the business market) was buoyant in 2006.

I now return to Mr Liddell’s arguments as to why I should find that there was no loss.

First, he says that the appropriate date for the assessment of the diminution in value is 2006. He says that the date of purchase is the usual rule, and that Pulver

Second, he says that the claim for the £800,000 is in reality a claim for a Hadleyv Baxendale type 2 claim for loss of profits. I do not consider that the £800,000 is a profit of the sort which was sought by the claimant in Pulver as referred to

Third, he says that £800,000 is not the best evidence of the diminution in value. He says that:

As to the first of these points, I have no hesitation in finding that the £800,000 was paid for the transfer of the Retained Land, and that no part of it related to the release of the Overage Deed and the Option Deed. The starting point is that that is what the relevant documents say. The transfer of the Retained Land states that the purchase price was £800,000, and the Deed of Termination states that the consideration for the release of the Overage Deed and the Option Deed was as set out in paragraph 28 above. Second, it is clear that Budgens and Maloneys agreed the release of the Option Deed and Overage Deed in exchange for an extension of the Retailer Agreement in relation to the Ascot Store in late 2016, and Maloneys, as Mr Maloney put it, honoured the spirit of that agreement by continuing to trade the Ascot Store as a Budgens until the termination of the Retail Agreement in the latter part of 2018. There is no evidence that any part of the £800,000 was attributable to the release of the Option Deed or the Overage Deed.

As to the second of Mr Liddell’s points, in my view the price paid for the acquisition of the Retained Land in 2018 is good evidence of the diminution in value assessed in 2018 arising from the exclusion of the Retained Land. First, there was evidence that a number of purchasers were not prepared to proceed without the Retained Land being included, as Mr Maloney informed Booker in a document he provided to them in late 2017. Second there were offers from two different purchasers for the property in 2018 at the same price of £5.4m less the price of obtaining the Retained Land (in one case with an additional “contingency” for the release from the Overage and Option Deeds.) Third, although the transaction which went ahead was structured as a share purchase rather than a property purchase, it is clear that effectively it was the property which was being acquired and £800,000 was taken off the purchase price in order to obtain the Retained Land. The document which Mr Maloney sent Booker on 12 December 2017 showed a calculation of the commercial result if the transaction were structured as a property sale or a share sale – the share sale was more advantageous from a tax perspective. Fourth, both the experts in their reports considered the price of obtaining the Retained Land as a ransom strip as a measure of the diminution in value of the property as a result of the retention of the Retained Land, and it was not suggested to Mr Palos in cross examination

I prefer Mr Palos’ evidence to that of Mr Clarke for the following reasons:

Accordingly, if it is relevant, then since I have found that the Budgens Agreements did affect the sale of the property for 20 years rather than 10 years, I would assess the diminution in value as at 2006 at £426,000, being halfway between the £432,000 figure given by Mr Palos in the joint statement on the basis of a 20 year restriction in the Option Deed and the £420,000 assessed on the ransom strip basis by Mr Palos, but deducting the purchase price for the business rather than the notionally allocated price for the property in 2006, as explained in paragraph 75(i) above.

Neither am I persuaded, as suggested by Mr Liddell, that the fact that I have found that the diminution in value assessed as at 2006 was lower than the diminution in value assessed as at 2017-18, should lead me to find that the evidence of what was actually paid in 2018 is not the best evidence of the diminution in value assessed in 2018. Maloneys were not given the opportunity to put things right in 2006; that is why I consider that it is necessary to assess damages as at 2018. It is not surprising that the figures are different at the different times; many things had changed, including the fact that in 2018 it was known that Budgens would not in fact exercise its option or right of preemption, whereas in 2006 that was a possibility but not a certainty.

Accordingly, taking into account all of Mr Liddell’s submissions, I am satisfied that £800,000 is an appropriate figure for the diminution in the value of what had been purchased arising from the Retained Land Breach.

As to the third of Mr Liddell’s points, these rights on the title are not pleaded, and clearly they were not of comfort to purchasers because as I have set out above, the purchasers in 2017-18 did indeed want the Retained Land included.

In relation to the fourth point raised by Mr Liddell, the scope of the duty owed by Mundays, this is raised on the pleadings but was no more than mentioned in closing submissions. I was not referred to any authority, though I have reminded myself of the leading authority of Hughes Holland v BPE Solicitors [2018] AC 599. The only matter put forward by Mr Liddell was a submission that there was no evidence that Mundays were told that Maloneys would sell on after 10 years. In my view Mundays are not assisted by any argument in relation to scope of duty. The parties have agreed that diminution in value was the appropriate measure of loss, and I have found above that the diminution in value should be assessed at £800,000 in 2018. This seems to me to be the end of the matter.

The particulars of claim also claim as damages arising out of the Retained Land

I therefore award damages in respect of the Retained Land Breach in the sum of

In case this goes further, if it were appropriate to assess the diminution in value of the property by reason of the retention of the Retained Land as at 2006 then I would award damages in the sum of £426,000 for the reasons set out in paragraphs 87-88 above.

Mr Maloney claims the interest and penalties due to HMRC arising out of the late payment of the additional £40,000 due in respect of the TP1. In fact, no penalties were levied, and the amount of interest paid was £18,440. Munday’s defence is that it must have been obvious to Maloneys either when reviewing the draft SDLT1 or when reviewing the completion statement that the SDLT payable was around £40,000 less than Maloneys had been expecting, and that therefore either Maloneys were grossly negligent in failing to correct the error in the SDLT1 form either before or soon after submission of that document so as to break the chain of causation, or Maloneys contributed to or caused its own loss by its own negligence.

Mr Maloney was sent the SDLT1 form under cover of a letter which said “I enclose [the SDLT1] for signature by you in box 71 where indicated with a pink sticker. Could you please ensure that your signature is in black ink only and the form returned to me unfolded otherwise it will not pass through the Revenue and Customs computer. I need to make the return within 30 days of completion and, bearing in mind that you no doubt have a million and one matters on your mind at the moment, please ensure that the form is returned to me immediately”. The letter did not invite or ask Mr Maloney to check the SDLT form, and acknowledged that Mr Maloney was very busy. Mr Maloney’s evidence is that

Mr Maloney was sent the completion statement under cover of an email dated

Mr Maloney’s evidence was that he had not checked the completion statement and had not noticed the error, and that he was expecting money back, for example because he had not opted to take certain IT equipment and there were calculations to be made in relation to various other matters such as stock. I accept Mr Maloney’s evidence that he did not in fact check and did not notice the mistake; the email from Mr Harris sending the SDLT form makes it clear that Mr Maloney was very busy at the time and that Mr Harris knew that. Indeed,

Mr Liddell also submitted that there was no loss because Mr Maloney brings this action as assignee. He pointed out that the £18,440 was paid after the date of the assignment, and was funded by Mr Maloney. In my view Mr Liddell is wrong to say that there is no loss. At the date of the assignment Maloneys had suffered loss because they had a liability to HMRC. They assigned the cause of action in respect of that loss and were then paid the £18,440 after the assignment. Maloneys had a complete cause of action which they assigned, in substance for payment of the sum which could be recovered.

Mr Liddell also submitted in his opening submissions that Mr Maloney needed to give credit for interest which he had earned by reason of keeping the £40,000 between 2006 and 2019. Mr Maloney’s evidence in cross examination was that the money he received back stayed in Maloneys and was used for general cashflow, and that the interest which Maloneys was paying to Barclays was 1.3% above base rate. Mrs Galley objected that this was not pleaded, and that accordingly no evidence had been called as to the state of the account between

It was accepted that interest will follow in the usual way, and on the basis that damages were assessed as at 2018 would run from the date of purchase, i.e. 30 November 2018. Mrs Galley sought interest on that basis at a rate of 4% over base rate on the basis that Maloneys had to borrow the money to pay the

Interest is sought pursuant to section 35A of the Senior Courts Act. The court’s approach to such interest was set out in Carrasco v Johnson [2018] EWCA Civ

The guidance to be derived from these cases includes the following:

In this case, it seems to me that since Mr Maloney brings this action as assignee of Maloneys, a borrowing cost for a claimant with the general attributes of Maloneys, ie a relatively small business, is appropriate. However, in accordance with the principles set out, the relevant rate is that at which persons with the claimant’s general attributes could borrow, rather than the actual rate at which the specific claimant can borrow.

I was provided with very little evidence or argument on interest. In opening, and before Mr Maloney’s evidence as to Maloneys’ actual rate of borrowing, Mr Liddell sought to set off against the SDLT damages interest at what he said was a relatively conservative rate of 2% above base rate, and this was also what he submitted was the appropriate rate if interest was awarded from 2018. In the absence of other evidence and submissions, and given the range of rates which have in recent years been awarded by the court to commercial claimants as set out in the Note on Awards of Interest in the White Book at 16AI, I consider that

If damages should be assessed in 2006 then I would award interest at the same rate from 6 September 2006.

I will also award interest at the rate of 2% above base rate in relation to the SDLT Breach which will run from 4 January 2019 when the amount was