Rosbeg Partners v LK Shield Solicitors

• Jurisdiction: Ireland
• Judge: O'Donnell J
• Judgment Date: 18 April 2018
• Neutral Citation: [2018] IESC 23
• Court: Supreme Court
• Docket Number: 91/16,[S.C. No. 91 of 2016]
• Date: 18 April 2018

Rosbeg Partners

Plaintiff

and

LK Shields (a firm)

Defendant

[2018] IESC 23

[S.C. No. 91 of 2016]

Supreme Court

Damages — Measure of damages — Causation — Professional negligence — Solicitor — Conveyancing — Failure of solicitor to register title — Loss of opportunity — Property market collapse — Decline in value of property — Calculation of damages — Whether negligence giving rise to entirety of loss suffered by plaintiff.

The defendant firm of solicitors was retained to act for the plaintiff in the purchase of a property in 1994. The defendant was responsible for registering the plaintiff as owner of the property in the Land Registry, but failed to do so.

In 2007, as the property market reached, what was in retrospect, its peak, the plaintiff sought to sell the property. In late 2007, it received an offer of €10 million. However, the title defect came to light before the sale could proceed, as a result of which the offer was withdrawn. The plaintiff took steps to remedy the defect and informed the potential purchaser in July 2008 that the title was in order. The property market had softened in the intervening period and the potential purchaser made a fresh offer of €6 million in August 2008, which the plaintiff rejected.

The Plaintiff Brought An Action For Damages For The Loss Suffered As A Result Of The Loss Of The Proposed Sale For €10 Million In 2007, Contending That The Sale Was Lost Due To The Negligence Of The Defendant. The Defendant Did Not Dispute That It Had Been Negligent In Failing To Secure The Registration Of The Plaintiff's Title. The Issue Therefore Was The Assessment Of Damages And In Particular Questions Of Causation And Mitigation Of Loss. By The Time The Action Was Heard By The High Court In 2013, The Value Of The Property Had Dropped To €1.5 Million As A Result Of The Collapse Of The Property Market.

The High Court (peart J.) Concluded That The Plaintiff Had Suffered Direct Loss Of €8.5 Million, Being The Difference Between The Figure At Which The Court Considered The Plaintiff Intended To Sell And Could Have Sold In 2007 And The Value At The Time Of The Hearing In 2013. The Court Allowed Further Sums In Respect Of Additional Interest Incurred On A Loan That Would Have Been Discharged Had The Property Been Sold And The Increased Rate Of Capital Gains Tax That Applied At The Time Of The Hearing, Giving A Total Award Of €11,077,209 (see [2013] Iehc 494).

The defendant appealed to the Court of Appeal (MacMenamin, Finlay Geoghegan and Irvine JJ.), which dismissed the appeal (see [2016] IECA 161). The defendant was granted leave to appeal to the Supreme Court (see [2016] IESCDET 143). The defendant also brought a motion before the Supreme Court seeking to admit fresh evidence that had come to light subsequent to the High Court hearing.

Held by the Supreme Court (Clarke CJ., O'Donnell, McKechnie, Dunne and O'Malley JJ.), in allowing the appeal and reducing the award of damages to €5,246,500, 1, that while the plaintiff's loss might have followed from the defendant's negligence that did not mean that it was caused by it in fact or in law. The defendant's negligence was not the “direct” or “factual” cause of the plaintiff's loss, other than in the sense that “but for” the defendant's negligence the plaintiff would not have suffered the loss. There were other “but for” causes of the plaintiff's loss including the collapse in the property market and plaintiff's decision not to sell.

2. That where the negligence was in failing to do something that could yet be done, then the measure of damages was, first, the cost of substitute performance of the duty, and second, any foreseeable loss in value caused by the delay.

3. That the plaintiff was entitled to recover the difference in value between the date on which a sale was probable and the date on which the impact on the title of the defendant's negligence had been removed. Accordingly, while the plaintiff continued to experience a drop in the value of its property following the date on which the title defect was remedied, responsibility could not, after that date, be attributed to the defendant's negligence.

4. That the analysis applicable to a “completed transaction” case, i.e., where the transaction would have gone ahead, but without the consequences of the solicitor's negligence, was not applicable where it was alleged that, as a consequence of the defendant's negligence, the plaintiff failed to secure a transaction it desired. The court had to consider the position that would have arisen if the defendant had not been negligent.

Kelleher v. O'Connor [2010] IEHC 313, [2010] 4 I.R. 380 distinguished.

5. That when dealing with calculations of loss, it was important for courts to recognise that it was easier to produce the narrative of commercial success in a courtroom, than it was to achieve that success in reality. Courts were required to approach claims not simply on the basis of the genuineness or plausibility of witnesses, but by applying common sense and an appropriate degree of scepticism to the task at each stage of litigation.

Obiter dictum, per O'Donnell J. (nem. diss.): Parties seeking to adduce fresh evidence should be clear about the evidence that was sought to be adduced and the distinction between the application to be permitted to adduce such evidence and the evidence itself. If there had been a substantial increase in the value of the property from the date of the High Court judgment, that might have been a relevant matter that could have satisfied the test to admit fresh evidence. Direct evidence could be adduced of value, which itself showed a substantial increase in value, and experts could give evidence of market movement and of the value of individual properties at different times.

Fitzgerald v. Kenny [1994] 2 I.R. 383 and MD v. ND[2011] IESC 18, [2011] 2 I.L.R.M. 385 considered.

Cases mentioned in this report:-

MD v. ND [2011] IESC 18, [2011] 2 I.L.R.M. 385.

The “Elena d'Amico” [1980] 1 Lloyd's Rep 75.

Fitzgerald v. Kenny [1994] 2 I.R. 383; [1994] 2 I.L.R.M. 8.

Galoo Ltd. v. Bright Grahame Murray [1994] 1 W.L.R. 1360; [1995] 1 All E.R. 16.

Hay v. O'Grady [1992] 1 I.R. 210; [1992] I.L.R.M. 689.

Hughes-Holland v. BPE Solicitors [2017] UKSC 21, [2017] 2 W.L.R. 1029; [2017] 3 All E.R. 969.

Kelleher v. O'Connor [2010] IEHC 313, [2010] 4 I.R. 380.

Stapley v. Gypsum Mines Ld [1953] A.C. 663; [1953] 3 W.L.R. 279; [1953] 2 All E.R. 478.

Determinations of the Supreme Court mentioned in this report:-

Rosbeg Partners v. LK Shields (a firm) [2016] IESCDET 143, (Unreported, Supreme Court, 22 November 2016).

Appeal from the Court of Appeal

The facts have been summarised in the headnote and are more fully set out in the judgment of O'Donnell J., infra.

On 8 November 2013, the High Court (Peart J.) awarded the plaintiff the sum of €11,077,209 together with costs in respect of professional negligence ([2013] IEHC 494).

The defendant appealed to the Court of Appeal against the order of the High Court. On 1 June 2016 the Court of Appeal (MacMenamin, Finlay Geoghegan and Irvine JJ.) dismissed the appeal ([2016] IECA 161).

The defendant sought to appeal to the Supreme Court by way of application for leave dated 19 July 2016. The Supreme Court (O'Donnell, McKechnie and Dunne JJ.), by determination dated 22 November 2016, granted the defendant leave to appeal ([2016] IESCDET 143).

The appeal was heard by the Supreme Court (Clarke C.J., O'Donnell, McKechnie, Dunne and O'Malley JJ.) on 7 November 2017.

Paul Sreenan S.C. (with him Andrew Beck) for the defendant.

Hugh I. Mohan S.C. (with him Rossa A. Fanning S.C. and John Lavelle) for the plaintiff.

Cur. adv. vult.

Clarke C.J. 18 April 2018

[1] I have read the judgment about to be delivered by O'Donnell J. and I agree with it.

O'Donnell J.

[2] This case raises, in a neat way, a difficult issue as to the calculation of damages for professional negligence occurring in the context of a property market that experienced considerable fluctuations in value. The case also illustrates a truth about litigation that is not always apparent from the reported decisions of appellate courts. It is not always the case that the issue upon which the case is ultimately decided is present and recognised as central at the outset of the case or during the trial. On the contrary, other issues, often factual, may loom larger in the trial and engage the focus and energies of the parties and the court. It is important therefore when addressing the important issues of law in any case, to have an appreciation of the range of other issues which were agitated at the trial and which shaped the evidence before the court, and the approach of the court to the case.

[1]

[3] The claim here is one of professional negligence brought by a client against its former solicitors. Nothing, for present purposes, turns on whether it is viewed as a claim for breach of a contractual duty or a parallel duty in tort arising out of the parties' professional relationship. It is not, and was not in dispute at the trial, that the defendant firm was clearly negligent and in breach of its duty in carrying out an important though routine task on behalf of its client, the plaintiff, which was itself blameless.

[4] The facts are set out very succinctly in the judgment of the High Court (Peart J). In February 1994 the plaintiff had agreed to buy property known as Unit 520 Western Industrial Estate, Naas Road, Dublin 12, for a sum of £765,000 from a company called Packaging Resources Limited (“PRL”). The defendant acted as solicitors for the plaintiff in the conveyancing transaction. The property was bought with a loan from Allied Irish Banks (“AIB”), and it was accordingly necessary to complete the conveyancing of the property from PRL to the plaintiff and to deliver title to AIB as security. There was nothing unusual about this. The purchase price was paid and the transaction closed on 6...