2. Clarke J., speaking of Warren Buffett s naked swimmers, put it as follows in ACC Bank Plc v. Johnston [2010] IEHC 236:-

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1 1. In the good times, banks engaged in shoddy lending practices, failing adequately to investigate the creditworthiness and trustworthiness of many of those to whom money was loaned. Solicitors were under pressure of time and were handicapped by the absence of a well-functioning system of title registration. Some acted carelessly, and in particular, there was an over-reliance on undertakings. The banks in turn paid little attention to the practices of the solicitors whom they had engaged. When it all went wrong, property prices collapsed. All of this combined to leave the banks with very large losses on property loans. 2. Clarke J., speaking of Warren Buffett s naked swimmers, put it as follows in ACC Bank Plc v. Johnston [2010] IEHC 236:- While Warren Buffett spoke of the international situation and the tide that undoubtedly went out as a result of the credit crunch in the United States, his comment is equally apposite to Ireland. The tide has undoubtedly gone out very far. The practices which were engaged in when the tide was very much in now have come under close scrutiny. Some of that scrutiny operates at the level of national policy. However, this Court and the Commercial Court in particular, has increasingly been faced with dealing with the consequences of practices engaging without comment or scrutiny when the tide was in, whose consequences are becoming increasingly apparent now that the tide is out Since large losses started to crystallise in 2009, the courts have dealt with a number of claims against solicitors, often initiated by the banks for which the solicitors had acted. The courts have not been forgiving of solicitors when assessing breach of duty. But the most outstanding feature of this litigation has been the effort of the banks to impose liability on solicitors for all of these losses, whether those were caused directly by the solicitors negligence, or indirectly by the banks carelessness or the collapse in the property market. In most, but not all, cases, the courts have been able, through the application of various legal principles, to ensure that a solicitor is liable only for the loss that he directly caused. 1 Paragraph 1.2 Breach of duty

2 4. In ACC Bank Plc v. Johnston [2010] 4 IR 605, the plaintiff bank lent money to the borrower, and engaged the defendant solicitor to handle the transaction. The defendant transmitted the money to the borrower s solicitor on the basis of undertakings given by the latter that the money would be applied in the purchase of specific properties or the payment of stamp duty. The undertakings were not met, and the money was not so applied. While it might have been normal at the time to accept such undertakings, Clarke J. said that the practice could not be justified under circumstances where a lending institution had instructed its own solicitor and where a three way closing was therefore practicable. The bank would have achieved better protection by getting undertakings directly from the purchaser s solicitor. Referring to Roche v. Peilow 2, Clarke J. pointed out that the mere fact that a practice was universal did not, of itself, protect the professional concerned from liability. He said at paragraph 6.23:- There is risk in everything. Professionals cannot remove risk from the equation. However, professionals are normally employed to 2 The standard of care to be met by a solicitor is well established. It is the standard set out in Dunne v. National Maternity Hospital [1989] IR 91, as qualified by Roche v. Peilow [1985] 1 IR 232. Henchy J. said at page 254 of the latter:- The general duty owed by a solicitor to his client is to show him the degree of care to be expected in the circumstances from a reasonably careful and skilful solicitor. Usually the solicitor will be held to have discharged that duty if he follows a practice common among the members of his profession: see Daniels v. Haskin [1954] IR 73 and the cases therein referred to. Conformity with the widely accepted practice of his colleagues will normally rebut an allegation of negligence against a professional man, for the degree of care which the law expects of him is no higher than that to be expected from an ordinary reasonable member of the profession or the speciality in question. But there is an important exception to the rule of conduct. It was concisely put as follows by Walsh J. in O Donovan v. Cork County Council [1967] IR 173, at p. 193:- If there is a common practice which has inherent defects, which ought to be obvious to any person giving the matter due consideration, the fact that it is shown to have been widely and generally adopted over a period of time does not make the practice any the less negligent. Neglect of duty does not cease by repetition to be neglect of duty The reason for that exception or qualification is that the duty imposed by the law rests on the standard to be expected from a reasonably careful member of the profession, and a person cannot be said to be acting reasonably if he automatically and mindlessly follows the practice of others when by taking thought he would realise that the practice in question was fraught with peril for his client and was readily avoidable or remediable. The professional man is, of course, not to be judged with the benefit of hindsight, but if it can be said that if at the time, on giving the matter due consideration, he would have realised that the impugned practice was in the circumstances incompatible with his client s interests, and if an alternative and safe course of conduct was reasonably open to him, he will be held to have been negligent.

3 minimise risk or advise clients on relevant risks. Professionals should not expose their clients to unnecessary risks without, at a minimum, advising their clients of the risk involved and inviting their clients instructions. The mere fact that there may be a common practice to expose clients to a particular type of risk will not necessarily provide a defence. The ordinary duty of care, therefore, extends not merely to ensuring that the relevant professional person carries out his or her duties in the way in which other suitably qualified members of the relevant profession do, but also extends to considering whether common practices may so obviously involve unnecessary risks which can be eliminated that such practices should not be engaged in. Thus, where the bank chose to reduce its risk by employing its own solicitor, it was not appropriate for the solicitor to take it on himself to expose the bank to the very risks that it had sought to avoid by employing the solicitor in the first place. If a three way closing was possible, then there was no reason for a solicitor retained by a bank to expose his client to the greater degree of risk that necessarily applied when undertakings were accepted. The decision brings home the importance of the principle that compliance with an accepted practice will not always provide a full defence In Whelan v. AIB [2014] IESC 3, the solicitors escaped liability, 4 but the Supreme Court shut down an escape hatch that the High Court judgment might have been seen as offering to solicitors generally. The High Court had determined that the plaintiff was relying on the advice given by his solicitor to the effect that the defendant bank would offer a loan on a non-recourse basis. However, the solicitor owed no duty of care, because the individual circumstances of the case 5 would make it unfair to impose one. 3 Kelleher v. O Connor [2010] 4 IR 380 is another example. The defendant solicitor was retained to act for the plaintiffs in the purchase of a restaurant premises from the third party. Clarke J. held that, while it was not common or recommended practice for solicitors acting on behalf of purchasers of restaurant premises to make direct inquiries with the Health Authority regarding the restaurant s registration status, the defendant s solicitors were nevertheless negligent in the particular circumstances of this case in failing to make inquiries of the health authority or in failing to advise the plaintiffs to do so. The particular features of the case that were taken into account were the plaintiffs lack of experience in the restaurant business, and the specific request made by them in relation to insuring compliance with the Food Hygiene Regulations. 4 This was not a claim by a bank against it solicitor. The plaintiff claimed that the terms of his loan to the bank were non-recourse in nature, but that if that was wrong, then his solicitor was liable to him because the solicitor had informed that the loan was non-recourse and the plaintiff would not otherwise have proceeded with the loan. The bank counterclaimed against the plaintiff for the amount of the loan. 5 The solicitor had a limited retainer, became involved late in the day, and the client did not give him to understand that his advice on the point was of any particular importance

4 6. The Supreme Court reversed both findings. It determined that the defendant solicitor negligently advised the plaintiff that a bank had agreed to advance him a loan on a non-recourse basis, when in fact the bank had not agreed to do so, but that the plaintiff suffered no loss because he placed no reliance on that advice. On the facts, the plaintiff was not concerned about the issue of whether or not the loan was non-recourse in nature. 6 Thus, he still lost his claim, although on almost the opposite of the grounds on which he lost it in the High Court. 7. The court s determination on the duty of care is of more importance for general purposes. O Donnell J. delivered a judgment with which the other members of the court agreed. In order to establish a duty of care, it must be shown that is that it is just and reasonable that the law should impose that duty on the defendant. 7 O Donnell J. explained that the High Court judge had been wrong in principle when he considered whether the particular circumstances of this case would make it unjust and unreasonable to impose a duty of care on the solicitor. The question of whether the imposition of a duty of care is just and reasonable is to be approached at a level of abstraction. The question is not whether it is just and reasonable to impose a duty of care on the particular facts of the case, but 6 The Supreme Court does not easily reverse a finding of fact, and its approach on this point is of general interest. At paragraph 78, O Donnell J. emphasised that the Supreme Court will reverse a finding of fact only where, on reviewing the evidence, it appears to the court that, notwithstanding the advantage which the tribunal of fact has in seeing and hearing the witness, the version of the evidence which was acted on could not reasonably be correct. He said:- While the state of a man s mind is a matter of fact to be proved like any other, proof of a statement of mind is always inferential. It is to be deduced from something else, such as the statement of the person and his or her actions. This is not a question of a conflict of oral evidence of perception as to whether certain matters occurred. In this case, it is more a matter of a valuation and deduction from the evidence as to the state of Mr. Lynch s mind and in particular whether he had made a decision not to enter the transaction unless the loan was non-recourse. While the trial judge made reference in observing Mr. Lynch while giving evidence that cannot overcome the contrary objective evidence. As Lord Atkin observed in Societe d Avances Commerciales (Societe Anonyme Egyptienne) v. Merchants Marine Insurance Co [1924] 20 Lloyds Rep 140 (p.152) `an ounce of intrinsic merit or demerit in the evidence,..is worth pounds of demeanour 7 O Donnell J referred to Glencar Exploration Plc v. Mayo County Council (No. 2) [2002] 1 IR 84 as to the circumstances in which a duty of care will be found to exist. At paragraph 63 of the judgment, he referred to the test for assessing any novel set of circumstances: That was where injury or damage was reasonably foreseeable, and there was sufficient proximity between the parties, a duty of care would nevertheless not arise in any such novel area unless the court considered that in all the circumstances it was just and reasonable that the law should impose a duty of care on the defendant.

5 whether it is just and reasonable to impose a duty of care in cases of the general nature of which the case before the court forms an example. O Donnell J. said:- The test does not mandate or permit a consideration of each individual case and whether the imposition of a duty of care, and therefore liability, meets some undefined concept of fairness in the particular case. If that were so, then the law would be no more than the application of individual discretion to different facts or circumstances which might well be decided differently from court to court. In such circumstances, the law of negligence would be little more than the wilderness of single instances criticised by Tennyson Those considerations led O Donnell J. to conclude that the solicitor in Whelan owed a duty of care to his client to give careful advice, notwithstanding that the solicitor had a limited retainer, that he became involved late in the day, and that the client did not give the solicitor to understand that his advice on the point was of any particular importance. O Donnell J. said:- If indeed it is necessary to consider afresh the question of policy then at the appropriate level of abstraction at which that issue must be addressed, it seems clear that the law has consistently and correctly held that an advisor such as a solicitor will owe a duty of care when giving advice to a client on an area within his or her expertise and where the request for the advice, and provision of it, is neither in casual circumstances nor entirely separate from the business then being transacted. It is not necessary that a client make very clear that the advice is critical to a new decision which he or she might make, or that it be the sole or decisive factor. The obligation of a professional person is to give advice some of which may be unwelcome. 8 O Donnell J referred to what Lord Browne-Wilkinson had said in Barrett v. Enfield London Borough Council :-.the decision as to whether it is fair, just and reasonable to impose liability in negligence on a particular class of would-be defendants depends on weighing the balance the total detriment to the public interest in all cases from holding such class liable in negligence as against the total loss to all would-be plaintiffs if they were not to have a cause of action in respect of the loss they have individually suffered..questions of public policy and the question whether it is fair and reasonable to impose liability in negligence are decided as questions of law. Once the decision is taken that, say, company auditors though liable to shareholders for negligent auditing are not liable to those proposing to invest in the company.that decision will apply to all future cases of the same kind. The decision does not depend on weighing the balance between the extent of the damage to the plaintiff and the damage to the public in each particular case.

6 Thus, a solicitor must assume that he owes a duty of care to his client in respect of all of the advice that he is giving, whether or not the advice appears to be of any particular significance to the client at the time when it is being given. The approach of the Supreme Court means that the individual circumstances of a particular case cannot be relied on to exclude a duty of care There have been a number of cases involving direct attempts by banks to enforce solicitors undertakings. 10 An application to enforce such an undertaking may be brought by way of special summons under order 3 rule 21 or 22 of the RSC. From Bank of Ireland Mortgage Bank v Coleman [2009] 3 IR 699, it is clear that if a bank has suffered loss flowing directly from the failure of a solicitor to honour an undertaking, it may be appropriate to order the payment of compensation, even if this will involve the enforcement of an isolated obligation within the undertaking, and even if the original purpose of the transaction could still potentially be achieved. 11 Geoghegan J. suggested that the following principles could be extracted from the authorities: although the jurisdiction is compensatory and not punitive, it still retains a disciplinary slant; 2. if a person has suffered loss the court has power to order the solicitor to make good the loss occasioned by his breach of duty; 3. failure to implement a solicitor s undertaking is prima facie evidence of misconduct even if he has not been guilty of dishonourable conduct; 4. the supervisory jurisdiction is not ousted by the defences that might be available to an action at law such as the Statute of Frauds but the court may take these factors into account in deciding whether or not to exercise its discretion and, if so, in what manner; 5. the summary jurisdiction involves a discretion as to the relief to be granted; 6. where it is inappropriate for the court to make an order requiring a solicitor to perform his undertaking e.g. on grounds of impossibility, the court has a discretion as to whether it 10 Bank of Ireland Mortgage Bank v. Coleman [2009] 3 IR 699 (SC); Allied Irish Banks Plc v. Maguire & others [2009] IEHC 374; Danske Bank v. O Ceallaigh [2011] IEHC See in particular paragraphs 7 and 8 of the Judgment of Geoghegan J. in the Supreme Court. 12 See paragraph 15.

7 should exercise the power to order the solicitor to pay compensation. Damages 10. The decision of the House of Lords in Banque Bruxelles S.A. v. Eagle Star [1997] AC 191 (commonly called SAAMCo) is prominent in the more recent Irish decisions. In SAAMCo, valuers were found to have negligently valued lands over which financial institutions obtained security. The financial institutions would not have lent the monies had they been apprised of the true value of the lands. They claimed against the valuers for the entire of the loss suffered by them as a consequence of having entered into the transactions, although much of the loss was in truth caused by the general decline in the value of property since the loans had been made. 11. The House of Lords held that where a person was under a duty to take reasonable care to provide information on which someone else would decide on a course of action, he was, if negligent, responsible not for all the consequences of the course of action decided on, but only for the foreseeable consequences of his breach of the information being wrong. The duty of the defendants had been to provide the plaintiffs with a correct valuation of the property, namely the figure that a reasonable valuer would have considered it most likely to fetch if sold on the open market. Thus, the measure of damages was the loss attributable to the inaccuracy of the information suffered by the plaintiff through embarking on the course of action on the assumption that the information was correct, which was the difference between the value placed on the lands by the valuer on the one hand and the true value of the lands at the relevant time on the other hand (less any recovery that could be made on the transaction). Any greater losses were caused, not by the negligence of the valuer, but by the coincidental and causatively irrelevant fact that the value of property generally had fallen. 12. Lord Hoffman provided the following example, very frequently quoted in English professional negligence cases:- A mountaineer about to undertake a difficult climb is concerned about the fitness of his knee. He goes to a doctor who negligently makes a superficial examination and pronounces the knee fit. The

8 climber goes on the expedition, which he would not have undertaken if the doctor told him the true state of his knee. He suffers an injury which is an entirely foreseeable consequence of mountaineering but has nothing to do with his knee. In such circumstances the doctor should not be liable for the injury, the reason being:-.that a person under a duty to take reasonable care to provide information on which someone else will decide upon a course of action is, if negligent, not generally regarded as responsible for all the consequences of that course of action. He is responsible only for the consequences of the information being wrong. A duty of care which imposes upon the informant responsibility for losses which would have occurred even if the information which he gave had been correct is not in my view fair and reasonable as between the parties. It is therefore inappropriate either as an implied term of a contract or as a tortious duty arising from the relationship between them. 13. Lord Hoffman contemplated that there may nevertheless be cases in which an advisor would be liable for the entire consequences of a transaction. He mentioned two possibilities in particular:- (a) He differentiated 13 between a duty to provide information for the purpose of enabling someone else to decide upon a course of action on the one hand, and a duty to advise someone as to what course of action he should take. In the latter case, the advisor must take reasonable care to consider all the potential consequences of that course of action. If he is negligent, he will therefore be responsible for all the foreseeable loss which is a consequence of that course of action having been taken. If his duty is only to supply information, he must take reasonable care to ensure that the information is correct and, if he is negligent, will be responsible for no more than the foreseeable consequence of the information being wrong. (b) He contemplated that fraud may be an exception to the principle that a person providing information upon which another will rely in choosing a course of action is responsible only for the consequence of the information being wrong See page See page 215, referring to the decision of Doyle v. Olby (Ironmongers) Limited [1969] 2 QB 158, where Lord Denning MR said at page 167:-

9 14. SAAMCo was a case involving the negligence of valuers, and not that of solicitors. The principles in SAAMCo are easier to apply in the case of valuers, because the result of negligence on their part is almost always a valuation that is wrong, so that the true measure of what follows directly from their negligence if easy to see. It is therefore less difficult to separate loss caused by that negligence from loss caused by other considerations. The tasks of solicitors are more complex and varied, and the results of negligence on their part often harder to isolate. 15. In Coleman, the undertaking case mentioned above, Geoghegan J. in effect applied the SAAMCo principle, but without expressly mentioning the case. He held that the compensation payable by a solicitor on foot of an undertaking that he had breached did not necessarily equate to the entire of the loan made by the bank. In particular, the bank was not entitled to compensation on account of losses that it had suffered arising from its own negligence in lending on an overvaluation of the property. He said:- 15 In this particular case, where the bank appears to have carelessly acted on an overvaluation of the property, it was, therefore, going to be at any rate left with a much lesser security than it anticipated. In those circumstances, it would not be appropriate to measure the compensation that might be ordered to be paid by the solicitor as the actual amount of the loan unless, of course, the bank had been misled as a consequence of fraudulent conduct to which the solicitor had been a party. In many cases in which this principle applies, the difference is between damages based simply on the amount of the loan on the one hand, as against damages based on an the value of the security that was not put in place on the other hand. The defendant is bound to make reparation for all the actual damages directly flowing from their fraudulent inducement. The person who is being defrauded is entitled to say: I would not have entered into this bargain at all but for your misrepresentation. Lord Hoffman however pointed out that a contrary view is expressed in Downes v. Chappel [1997] 1 WLR 426. As the question of liability for fraud did not arise in SAAMCo the House of Lords did not express any concluded view on this exception. The views of Geoghegan J. in Coleman mentioned above however, albeit in the context of suing on foot of undertakings, suggest that the exception forms part of Irish law. 15 At paragraph 16

10 The latter might be substantially less than the full loss suffered by a financial institution as a result of entering into the transaction In Kelleher v. O Connor [2010] 4 IR 380 Clarke J. found that if the defendant solicitors had fulfilled their task properly, the plaintiffs could and would have legitimately pulled out of a contract to purchase restaurant premises. He gave general guidance on the issue of the assessment of damages in solicitors negligence cases. He said that there are, in general, three options, as follows 17 :- (i) If the evidence demonstrates that, were it not for the solicitor s negligence, the client would not have gone ahead with the transaction at all, then the proper approach is to look at what would have happened had there been no completed transaction. This is a no transaction case. (ii) If on the other hand the evidence establishes that, in the absence of negligence, a complete and proper transaction could have taken place, albeit on different terms, then damages are assessed on the basis of what would have happened if the transaction had been properly conducted. This can be called a completed transaction case. 18 (iii) However, according to Clarke J., there may be intermediate cases where it is not possible to say for certain what would have happened. If the vendor would have been unwilling to renegotiate the terms of the contract, it would be a no transaction case. If the vendor would have been willing to renegotiate, it would be a completed transaction case. In those cases, if there is a significant difference in the measure of damages as between a no transaction outcome and a completed transaction outcome, the court must take a view on how likely it was that the problem 16 In Coleman, the assessment of compensation was remitted to the High Court. It is clear from the report that compensation would be much more limited again, by reason of the fact that, after the first High Court hearing, the title had been put in order and the bank s security completed 17 Paragraphs 51 to 60 of the judgment. 18 It is noteworthy that in SAAMCo, at p. 218 Lord Hoffman said that the distinction between no transaction cases and successful transaction cases was not based on any principle and should be abandoned. Every case in which a different outcome would have followed is in one sense a no transaction case, because it is premised on a finding that the transaction that did occur would not have occurred. There is a wide range of things that might have occurred instead, and there is no reason to apply different principles to one category of case as opposed to another.

11 concerned could have been solved and assess damages somewhere between the two values, having regard to the likelihood that a successful conclusion could have been reached in the event that the solicitor concerned had not been negligent. 17. This is encapsulated in the following statement of Clarke J.:- 19 I am, therefore, satisfied that the overall approach that the court should adopt in cases of solicitors negligence in the conveyancing field is to first identify whether, on the evidence, it is proper to regard the case as a no transaction case, where in the absence of solicitors negligence the transaction simply would not have gone ahead, a completed transaction case, where, in the absence of solicitors negligence a successful conclusion of the transaction would have occurred or an intermediate case. Where there is no significant difference in the calculation of the damages under either heading, it may not make much difference. Where, however, as was undoubtedly the case in Joyce v. Bowman Law Limited [2010] EWHC (Ch) 251, [2001] 1 EGLR 129 (or in other such cases where there is a loss of bargain involved or the relevant property is of particular value to the purchaser), there is a significant difference in the proper approach as between the two cases, the court, in an intermediate case, must take a view on how likely it was that the transaction concerned could have been solved and assess damages somewhere between the no transaction value and the completed transaction value, having regard to the likelihood that a successful conclusion could have been reached in the event that the solicitor concerned had not been negligent. In practical terms, it appears that Clarke J. envisaged, in these intermediate cases, the deduction a percentage from the full value, so as to reflect the possibility that the transaction might have been completed. In the case that he cited with approval, Joyce v Bowman Law, the court assessed that there was a 29% chance of developing property, based on an 85% chance of obtaining an option to purchase from a third party, a 50% chance of obtaining planning permission, and an 85% chance of funding development. 18. Clarke J. said 20 that his suggested approach to intermediate cases was based on reasons similar to those identified in Philp v. Ryan [2004] 4 IR 241. Philp v. Ryan was a case in which damages were awarded for possible loss of life expectancy, due to the loss of the opportunity to avail of medical treatment. The Supreme Court held that the balance of probability test did not apply to the assessment of damages for future 19 At paragraph At paragraph 58.

12 uncertain events, and that the trial judge had erred in holding that damages depended on proof that life would probably, not possibly have been prolonged. With respect to Clarke J., one would not have thought that the logic of Philp v. Ryan applies to cases such as those identified by him, in which the question is not that of assessing future uncertain events, but rather that of assessing past hypothetical events. There are many cases in which the assessment of damages depends on the court s assessment of past hypothetical events, in almost all of which it is not possible to say for certain what would have happened. Clarke J does not explain how one decides that a particular such case falls to be assessed on the balance of probabilities, as opposed to being assessed on the basis of allocating damages according to a percentage evaluation of chances. 19. The English courts have addressed this issue in a somewhat different way, although with results that may be much the same. In professional negligence claims, although not in personal injury actions, future uncertain events are assessed according to percentage chances. 21 The various possibilities in relation to past events were discussed in Allied Maples v Simmons and Simmons [1995] 1 WLR 602 (CA), a solicitors negligence case. First, in relation to past actual events, the ordinary balance of probability test applies. Secondly, there are cases which depend on the hypothetical question of what the plaintiff would have done if there had been no negligence: these again are assessed on the balance of probability. Thirdly, there are cases which depend upon the hypothetical question of what a third party would have done if there had been no negligence, whether in addition to action by the plaintiff or independently of it. Here the plaintiff must only show that he had a substantial chance of the third party acting in such a way as to benefit him: if he can do that, then he recovers according to a percentage evaluation of the chances See McGregor on Damages (19 th ed.) para In England, the proposition that damages are available for loss of chance in respect of future uncertain events has no application to personal injury cases: see Gregg v Scott [2005] 2 AC 176, discussed in McGregor at paras to The position is probably different in Ireland, although it has been said that there is an irreconcilable difference between the Supreme Court decisions of Philp v Ryan on the one hand and Quinn v Mid- Western Health Board [2005] 4 IR 1 on the other hand, the former permitting damages for loss of a chance and the latter excluding it. 22 See McGregor on Damages (19 th ed.) to ; Jackson and Powell Professional Negligence (7 th ed.) to Finlay Geoghegan cited Allied Maples with approval, although not on each of the points decided by it, in ACC Bank plc v Fairlee [2009] IEHC 45, para 43. It was applied by McKechnie J in Minister for Communications v Figary Watersports Developments Ltd. [2012] IEHC 601, para 98

13 20. In another of his judgements in ACC v Johnston 23, Clarke J. assessed damages against the solicitors. He held that, in no transaction cases, the fundamental approach must involve an analysis of what would have happened if the transaction had not taken place. He said, at paragraph 117:- In a no transaction case, involving the injured party expending monies as of the date of the wrong, damages will normally involve the amount of the monies so expended less any value obtained by the transaction (which obviously would not have been obtained had there been no transaction). However, damages also need to reflect the fact that the party has been without its money between the date of the wrong and the trial. However, where a bank has advanced money in a no transaction case, it will not necessarily be assumed that, if the transaction had not taken place, the bank would have made the same profit through use of the money that it bargained to make in the instant transaction. After all, it may be that the bank would have loaned it to another property investor, and made a loss on that loan even if it had been secured. Thus, the bank has to establish what it would have done with the money if it had not loaned it in this transaction. As Clarke J. said at paragraph 123:- It is interesting to note that in some of the English cases, financial institutions claiming damages against their solicitors for negligence in circumstances such as those which have arisen in this case, place before the court evidence of the ordinary return which their relevant financial institution made in transactions of the relevant general type at the time in question. That seems to me to be a more appropriate basis for the assessment of damages in no transaction cases of this type. In Johnston, the bank satisfied him on the evidence that, if it had not advanced this loan, then it would not have borrowed the relevant money at all from its parent, so that the measure of damages was therefore prima facie the amount borrowed from the parent together with the cost of borrowing, less the amount likely to be recovered from realising the security that was put in place. 21. Clarke J. did not however award damages on that basis. Rather, applying SAAMCo, he held that not all the losses arising from the transaction were recoverable. Specifically, the bank was not entitled to recover in respect of losses that were truly caused the underlying disadvantageous nature of the transaction itself. The solicitors had not been retained to guard against that risk. To implement these findings, he assessed damages as being the essence the value of the missing security. 23 At [2011] IEHC 376. There were five judgments by Clarke J in all in this case.

14 22. Clarke J. made it clear that it is not in every case that the SAAMCo principle can be relied on to deprive a plaintiff of the entire loss that he has suffered from entering into the contract. As appears above, it applies in particular to cases in which the professional is under a duty to provide information or advice, and not to advise on the wisdom of the transaction. If that is so, then in general, the loss for which they are responsible will be limited to the consequences of the particular information of advice being inaccurate. However, there are cases in which the duty of the professional will go further He referred in particular to Bristol & West B.S. v. Fancy & Jackson [1997] 4 All ER 582, another solicitors negligence case, in which the court had found that the solicitors were liable for the entire loss caused by the transaction. However, he pointed out that it was a case in which the solicitors had been specifically retained to report on all matters coming to their attention that might throw doubt on the lending transaction concerned, and that in a number of respects the solicitors had failed to report curious features of the transaction. On the facts of that case, it was held that, had the solicitors concerned not been negligent, the relevant financial institution would simply not have entered into the loan transaction. Clarke J. pointed out that Bristol & West was an example of a case in which the solicitors had failed to do the very thing that they had been retained to do, so that it was hardly surprising that the court took the view that the financial institution was entitled to recover its full losses. At paragraph 7.21, he said:- The no transaction jurisprudence is primarily directed to ensuring that a plaintiff cannot recover a loss of bargain which the plaintiff may suffer by reason of a transaction not going ahead in circumstances where, even had the relevant defendant not been guilty of negligence, the transaction would not have gone ahead anyway. The no transaction jurisprudence is designed to exclude such damages. It does require that the starting point for a consideration of the plaintiff s proper damages is, therefore, to calculate what would have happened had the transaction not gone ahead. However, it is also clear from cases such as SAAMCo that not all of the losses which may arise from the transaction going ahead may be recoverable. Where the primary breach of duty found against the defendant is such as leads to the inference that that breach of duty was directly 24 It should be remembered that SAAMCo was a case of valuers negligence, where it is almost always the case that the valuer is retained merely to provide information. The range of tasks carried out by solicitors is wider, and thus it is intrinsically more likely that cases involving solicitors may fall outside the SAAMCo principle.

15 responsible for the transaction going ahead then, as per Bristol & West, the full losses may be recoverable. But where, as here, the fact that the transaction might not have gone ahead in the absence of negligence is only a tangential or highly indirect consequence of the negligence and where, as a result, it is possible to divide the losses on the transaction between those which are directly attributable to the negligence of the defendant and those which are, in truth, attributable to the underlying disadvantageous nature of the transaction itself, then it seems to me that the justice of the case requires the court to calculate the damages by reference to that portion of the losses which derive directly from the negligence of the defendant. Clarke J. held that, on the facts of the case before him, those losses were the value of the security, because it is the fact that the loan money was gone but no security was in place that was the direct consequence of the defendant s negligence. 24. The following general principles can be extracted from the Irish cases, including in particular Johnston.:- (a) In a no transaction case, the starting point is that the plaintiff is entitled to damages based on what would have happened if the transaction had never occurred. (b) That will generally involve the plaintiff having to lead evidence of what it would have done with the money if it had not engaged in the transaction that ought not to have gone ahead, and establish the profit that it would have made on that money under those circumstances. (c) In some cases, the entire measure of damages suffered as a consequence of entering into the transaction will be recoverable. In particular, where the evidence establishes that the loss flowed directly from the very thing that the defendant was engaged to guard against, or where the breach of duty is directly responsible for the transaction going ahead, then the entire losses should be recoverable. (d) However, in the more normal case where the solicitor was engaged merely to provide information or legal advice, and part of the loss does not result from the solicitor s negligence but rather from some other coincidental factor such

16 as a general decline in the value of property, then the plaintiff s measure of damages will be reduced accordingly. In some cases, that may mean that the measure of damages is limited to the value of the missing security. 25. In KBC Bank v. BCM Hanby Wallace [2013] IESC 32, the court found quite a different legal route by which to impose on the bank liability for its own actions. The plaintiff retained solicitors to obtain security over various properties in support of loans that it was making to a borrower. Instead of obtaining the securities prior to the closing of the loan transaction by payment out of the loan monies, the defendant solicitors closed on the basis of accepting undertakings given by the borrower s solicitor. The defendant solicitors had no authority to accept undertakings, and did so without reference to the bank. The undertakings were not honoured. 26. In the High Court, the trial judge found that, if the defendant s solicitors had done the job for which they were retained, the bank would never have released the money. Thus, the judge took the view that this was a no transaction case. The defendant solicitors argued, on the application of the SAAMCo principle, that it was liable only for its failure to obtain the security that it ought to have obtained: it was not liable for the fact that the bank had agreed to lend the money in the first place, because that decision had been made by the bank. The bank argued however that, on the facts of the case, the money would never have been advanced if the defendant s solicitors had performed their duty. The trial judge held for the bank on this point, so that it was entitled to recover all of the losses that it had suffered as a result of entering into the loan transaction The trial judge also rejected the defendant s solicitor s argument on contributory negligence, deciding that the bank could not be guilty of contributory negligence, because the failures alleged against it (for instance, to investigate the financial soundness of the borrowers) was simply a causa sine qua non, and not a causa causans or proximate cause of the loss. 28. The no transaction finding, and the rejection of the applicability of SAAMCo, was not appealed. Contributory negligence was the central issue therefore that arose on the appeal. 25 See paragraph 30 of the Judgment of Fennelly J. in the Supreme Court for an account of this part of the High Court decision.

17 29. The Supreme Court distinguished between two possible causes of the bank s loss. There was the defendants negligence in accepting the undertakings, but there was also the bank s (presumed) negligence in failing properly to investigate the financial soundness or reliability of the borrowers before agreeing to loan the money. Both were effective causes of the bank s loss. While it is true that a defendant should not be absolved even partially from fault when its own negligence consists of a failure to the very thing it was engaged to do, the solicitors were not engaged to check the financial soundness or reliability of the borrowers. Thus, the bank was guilty of contributory negligence in respect of their (presumed) negligence in failing to check the financial soundness or reliability of the borrowers. 30. It was also alleged that the bank was negligent in failing to verify or supervise the performance by the solicitors of their duty. The Supreme Court held that, while the bank was entitled to rely on the expertise of the solicitors to ensure that security was put in place, it did not necessarily follow that the bank could not be guilty of contributory negligence in this regard also. Fennelly J. said:- 26 With regard to the second category of acts of contributory negligence, the bank was entitled to rely on the expertise of the appellant to ensure that security was put in place.it might well be argued that the bank s responsibility was so small that it would not be just and equitable to fix it with any responsibility. However, there is no absolute rule. It is a matter for judgment in each case of the relative measure of responsibility. As a matter of principle, it is possible that, if the evidence showed that the errors of the appellant were known to the bank and overlooked or were so obvious that they could not be ignored, there was fault on the part of the bank Accordingly, the issue of contributory negligence was remitted to the High Court. 31. It might be suggested that, if that was so, then the SAAMCo principle could equally have been applied, and that it would be in principle a more satisfactory approach. If the solicitors were liable only for losses caused by their failure to do what they were retained to do, and not for losses caused by extraneous considerations such as the bank s failure properly to investigate the borrowers, then it would have followed that damages should be measured by reference to the failure to obtain the security provided by the facility letters, and not by reference to the entire loss suffered by the bank as a consequence of entering into the transaction. In some cases, this might 26 At paragraph 104

18 lead to a very different result from the application of the principles of contributory negligence. Where applicable, the SAAMCo principle would in for instance excuse solicitors not just from liability for losses caused by failures on the part of the bank, but also for liability for losses caused by matters (such as a fall in the value of the property market) which are not the fault of either party. 32. Rosbeg Partners v. LK Shields [2013] IEHC 494 is an example of an assessment of damages on the basis of a completed transaction case in which the SAAMCo principle apparently had no application. The negligence identified by Peart J. was a failure on the part of the defendant s solicitors to ensure that the plaintiff s title was properly registered in the Land Registry, so that when the time came some years later to sell the land, an opportunity of doing so at a valuable price was missed. The negligence turned out to be expensive, because the offer that was received for the property was one of 10 million, whereas it was worth only 1.5 million by the time that the judge came to assess damages The decision of Peart J. does not contain any discussion of SAAMCo. At one level it might be thought to apply: after all, the precise point in SAAMCo is that a negligent valuer is to be liable only for such loss as flows from his own negligence, but not from the coincidental fact of a decline in the value of property generally. Most of the loss in this case arose from the latter. However, as Clarke J. made clear in ACC v. Johnston, there are cases in which the SAAMCo principle does not apply to solicitors negligence. Although the issue is not analysed in the judgment, it may be that this was such a case. A solicitor is retained to register title precisely so as to ensure that his client s property will be readily capable of sale at the appropriate time. Under those circumstances, it may correctly be said that the solicitor, at least in respect of this part of his duty, has taken on the risk of a falling market. 34. Walter v. Peter Crossan and Crossan Homes Limited and Hayes McGrath [2014] IEHC 377 reaffirmed, in the context of solicitors negligence, that a plaintiff in an action for negligence cannot recover damages for upset and inconvenience caused by a breach of a duty of care, where that upset and inconvenience falls short of nervous shock and psychiatric injury. The claim against the solicitors was one in 27 Peart J. determined that the failure of the plaintiff to accept subsequent offers at figures of something less than 10 million did not constitute contributory negligence, because on the facts it was not unreasonable to refuse those offers, in the hope of trying to negotiate for a better price.

19 negligence only, and not in contract: the solicitors had acted not for the plaintiffs but for the developers of property who are also defendants in the case. The issue before the court however was that of whether it was stateable to suggest that damages for inconvenience and distress were recoverable from the solicitors, assuming breach of a duty of care. Hogan J. pointed out 28 that damages for distress and inconvenience are at least in principle recoverable in an action for breach of contract. However, he said:- 29 Where as in the present case there is no such contractual relationship, it is clear from the case law that damages for inconvenience and upset of this nature are not recoverable. This is illustrated by two relatively recent decisions of this Court, Larkin v. Dublin City Council [2007] IEHC 416, [2008] 1 IR 391 and Hegarty v. Mercy University Hospital, Cork [2011] IEHC 435. Hogan J. went on to point out that there are other cases, outside contract, where acute forms of mental distress may be compensated. In particular, there is the tort of deliberately inflicting emotional harm recognised in Wilkinson v. Downton [1897] 2 QB 57, and the circumstances recognised by Hogan J. himself in Sullivan v. Boylan [2012] IEHC 389 and [2013] IEHC 104, in which a plaintiff had been harassed and subject to threats within her own house by a debt collector. It was held that she could recover damages for breach of her constitutional rights to the protection of the person and the inviolability of the dwelling. However, damages were not recoverable for inconvenience and distress in a negligence action, and the claim against the defendant solicitors was therefore struck out. Contribution who else will pay? 35. In two other judgements in ACC & Johnston, Clarke J. analysed the relative contribution of two solicitors. The first solicitor had been engaged by ACC to look after its interests and had been found to be negligent in accepting undertakings from another solicitor. Damages had been assessed at 2 million. The second solicitor had given the undertakings that the first solicitor ought not to have accepted. The question of whether the second solicitor could be made to indemnify the first solicitor, or contribute to the damages payable by him, now had to be considered. 28 Paragraphs 18 to Paragraph 20