Before : THE HONOURABLE MR JUSTICE AKENHEAD Between :

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1 Neutral Citation Number: [2010] EWHC 1063 (TCC) IN THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION TECHNOLOGY AND CONSTRUCTION COURT Case No: HT Royal Courts of Justice Strand, London, WC2A 2LL Date: 14 May 2010 Before : THE HONOURABLE MR JUSTICE AKENHEAD Between : ALDGATE CONSTRUCTION COMPANY LIMITED - and - UNIBAR PLUMBING & HEATING LIMITED Claimant Defendant Kim Franklin (instructed by Berrymans Lace Mawer) for the Claimant Michael Taylor (instructed by Keoghs) for the Defendant Hearing dates: April JUDGMENT I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic....

2 Mr Justice Akenhead: Introduction 1. The claim in this case relates to the damages flowing from a fire on 9 March 2005 caused by the now admitted breach of contract of the Defendant. The fire substantially damaged No. 35, Cambridge Road, Dunton, Bedfordshire, which was one of two houses (the other being No. 33) being developed on the same plot by the Claimant, a family owned company. By its Amended Particulars of Claim, the Claimant claims 776,599 in damages, most of which is predicated on the basis that the Claimant was effectively prevented by the fire from pursuing an established practice or policy of constructing two properties on the same site at any one time ( dual property sites ). The Claimant s primary case is that it is entitled to the loss of profit which it would have earned on three sets of dual properties which it would otherwise have developed but did not. 2. The case raises interesting issues of causation and in particular on the applicability of the but for test of causation. The Facts and the History 3. There have only been two live witnesses of fact, the first being Mr John Shipp, the effective founder of Aldgate, whose principal evidence was given in three witness statements. I found him to be honest and decent; his general credibility was not challenged and I have no hesitation in accepting all his evidence about the actual facts and history as to what happened before and after the fire. Mr Bussetil also gave evidence; he was the property developer who owned a development site at 2, Ermine Street, Great Stukeley, split into three plots, one of which Aldgate had purchased before the fire, hoping to acquire one of the other plots later. After some initial misgivings, I formed the view that, although some of his evidence was based on hearsay, he was broadly honest and helpful. There was some evidence which was admitted without the witnesses being called, although such evidence added little. Each party called an accountant expert, Aldgate s being Mr Hodgen and Unibar s being Mr Liddell. Although much of their evidence involved the logical marshalling of generally available data, and their agreements were recorded in the Joint Statement dated 1 April 2010 were very helpful, their contributions beyond that were of relatively limited value. On balance, where they differed, I preferred the evidence of Mr Hodgen who gave his evidence in a very straightforward and helpful way. I formed the view that Mr Liddell had been somewhat rushed before the trial; for instance, without much good reason, he did not produce a proper report until the first day of the trial albeit that he had indicated the substance of what he was likely to say in the 3 to 4 weeks before. I particularly felt that his exercise in averaging construction times was positively unhelpful. 4. The evidence establishes clearly that Aldgate Construction Company Ltd ( Aldgate ) was a family run and operated business which produced high-quality work and which generated substantial profits principally in those developments in respect of which they acquired the sites. Mr Shipp acquired Aldgate as a ready made company in August 1996 and financed it with just over 300,000 of his own capital. The purpose of having a limited company was to separate financial risk away from his family. Mrs Shipp is the company secretary and, whilst all his sons are directors, one, Nick, works

3 full-time for Aldgate. Aldgate has focused on dual property developments throughout its life, at least until the fire, because it was more cost efficient to build two houses together on one site than separate houses on different sites and it was found in practice that it was cheaper per unit to buy dual property sites. It is accepted by both parties in this case that there was an advantage and economies of scale in constructing two houses on one site at about the same time rather than two houses on separate sites, particularly if those sites were some way apart. Aldgate tends to use the same subcontractors, the same methods of working and same types of materials for its developments. Subject to a few exceptions, the dual property approach represented Aldgate s usual way of proceeding. The business was self-funded with the profit from the sale of developed properties being utilised to fund the next project. It was only very rarely and for very short periods of time that Aldgate needed overdraft facilities from its bank. 5. A brief description of each of the projects undertaken by Aldgate over the years gives an insight into the type of work which the company was able and willing to undertake: (a) Blunham: this was a single plot on which the company started work first in 1996 as the work was being done part-time. The gross profit was 27%. (b) Offord: Aldgate purchased this two house development site in the gross profit margin was 29%. (c) Keyston: this was a two plot site purchased by Aldgate in about 1998 but was not developed until 2000 and the two properties were sold in The gross profit was 41%. (d) Melbourn: this was a three house development in which Aldgate were merely the contractors for a company called Amber Homes; the work was done in The gross profit margin was 23%. (e) Steeple Morden: again retained as contractors in 1999 by Amber Homes, Aldgate constructed some of the work on a six house development. Gross profit was 17%. (f) Potton: Aldgate purchased this dual property site in about Gross profit margin was 47%. (g) Bees House: Aldgate was employed as a contractor in 2002 to build a interesting and challenging house construction on some 14 acres of land. The gross profit was 30%. (h) The Baulk: in 2003, Aldgate did substantial renovation and expansion work on a property owned by Mrs Shipp s parents. The gross profit was 33%. (i) Mr Lakofski: in 2004, Aldgate was persuaded to do an interesting refurbishment and extension job for a neighbour next to Bees House. Gross profit was 45%.

4 (j) Cambridge Road, Dunton: Aldgate purchased this dual property site in 2003 and, although some work was done on it, that was interrupted by the work for Mr Lakofski and at The Baulk. No 33 had been completed by January 2005 when it was sold by Aldgate for 475,000. (h) 2, Ermine Street, Great Stukeley: this was a site owned by a Mr Bussetil, a property developer, and on which planning permission for three houses had been given. Aldgate purchased one of the plots (Plot 3) in February 2005 intending if possible later to purchase a second plot. However, unknown to Mr Shipp, Mr Bussetil had decided in about October 2004 to construct a house on Plot 2 for himself and had applied for planning permission in February 2005 (obtaining it in late March, 2005). In late March or April 2005, a Mr and Mrs Stockley had put in and had accepted an offer subject to contract for Plot 1, contracts being exchanged on 8 June 2005 with completion on 24 June It was Aldgate s practice, certainly by 2005, to place spare cash on Treasury Deposit which by that stage at least was earning some 5 to 6%. 7. No 35 was close to completion by the time of the fire on 9 March For instance, the kitchen was fully fitted out. Although it had been marketed for some time and Mr Shipp had received an offer or at least an expression of interest to buy it, there was no buyer in any way waiting in the wings. Aldgate had used Unibar Plumbing & Heating Ltd ( Unibar ) for some years and it appears that they had a good working relationship. Unibar were doing some of the plumbing works as a subcontractor at No 35, having been employed on a relatively simple contract since about October At or before that contract, Mr Shipp s and Aldgate s evidence establishes, and I accept, that Unibar knew that Aldgate was a development company, that it developed dual property developments for resale and that it used its own money without borrowing investment capital. Unibar employed a subcontracted plumber, Mr Thompson, for that purpose. On 9 March 2005, Mr Thompson came to the site to do some snagging work, part of which involved the use of a blowtorch. It is accepted that, negligently, he caused a fire which took hold and spread into the roof, causing very substantial damage to the house. 8. Thereafter, Aldgate, Mr Shipp in particular, had to notify insurers and allow investigators from his own insurers and the insurers of Unibar and of Mr Thompson onto the site. There is no suggestion that Aldgate behaved anything other than properly, or materially delayed matters, in the few months which followed. Aldgate considered the possibility of borrowing money from the bank and Barclay s Bank wrote on 13 May 2005 offering loans totalling 500,000 on terms that there should be provided charges by way of security over three building sites, 2, Ermine Street, 35, Cambridge Road (and a third site yet to be purchased), a debenture over the company assets and a personal guarantee from at least Mr Shipp. Charges were to be Base Rate % with 1.5% by way of arrangement fee. As Aldgate had never borrowed money in this way before, as the directors were keen to avoid personal liabilities and felt unable to give guarantees and as they were concerned that time and money would be diverted to paying the bank and to accommodating site visits and the like from bank appointees, they decided not to secure a loan from the bank. 9. Whilst waiting for a settlement from its insurers, Aldgate commenced construction work on Plot 3 at Ermine Street in May By 20 July 2005 a settlement was

5 reached between Aldgate and its insurers, Royal and Alliance, whereby the insurers agreed to pay Aldgate in full and final settlement a sum of 200,000 in respect of the fire damage to No. 35, Cambridge Road. That sum was paid promptly. Works proceeded at Plot 3, Ermine Street until about December 2005 when Aldgate, having earlier made the decision to do so and having secured the necessary further planning permission, demolished down to ground level the fire-damaged remains of No. 35 and rebuilt it. There is no doubt that it diverted all its resources to doing this and indeed suspended work on Plot 3 for a period of about three months. The reconstruction of No. 35 was completed within the unusually short period of four months. However, for reasons which had not been explored in evidence, No. 35 was not sold until September 2006, although the housing market remained buoyant and, as Mr Shipp said in his first statement, he and his fellow directors concentrated on marketing and selling it. There is no suggestion that Aldgate delayed matters in selling No. 35. There is no complaint that Aldgate acted unreasonably in demolishing the fire damaged premises and rebuilding. Meanwhile in March 2006, Aldgate resumed work on Plot 3 at Ermine Street, completing the house in question by about September 2006; the total construction period for Plot 3 excluding the period in which works were suspended was some 14 months. Again, for no given reasons, that property was not disposed of until September 2007, some 12 months later. The sale prices for No. 35 and Plot 3 were 500,000 and 520,000 respectively. In December 2006 or early 2007, as Mr Shipp said, Aldgate purchased a single development property, 177, Ugg Mere Court Road, Ramsey Heights which took some 12 months to construct. 10. I am wholly satisfied on the evidence that Aldgate s established practice and policy was to acquire and develop dual property sites and, if the fire had not happened, its preference would have been next to develop a dual property site. It would have wanted to acquire Plot 1 or Plot 2 at 2, Ermine Street. I am satisfied that there was a more than insignificant chance that it would have been able to acquire another plot at 2 Ermine Street. Although it is most unlikely that Mr Bussetil would have been persuaded to give up the plot on which he was going to build his own house to live in (plot 2) and for which he had obtained a specific planning permission, there was a substantial chance that, depending on price and on whether Aldgate could exchange contracts quicker than Mr and Mrs Stockley whose offer had been accepted, subject to contract, Aldgate might have been able to gazump them on Plot 1; it would certainly have had to do so. I conclude therefore that, if No 35 had not burned down, Aldgate could have obtained Plot 1 at Ermine Street to run as a dual property development but, if not, it would have to have developed Plot 3 and would have been able to secure and develop another building plot elsewhere separately (and would have done so). On the other hand in these latter circumstances, I have no doubt that both projects could and would have been run virtually simultaneously, although it may well be that Plot 3 would always have been somewhat ahead of the other development. 11. It is clear that Unibar s and Mr Thompson s insurers were fully engaged by April By September 2005, Unibar s insurers were saying that in effect Aldgate would have to look to Mr Thompson s insurers, who in turn were arguing by November 2005 that their insured had no liability to Aldgate. On 26 May 2006, Aldgate s solicitors sent a Pre-Action Protocol Letter of Claim both to Unibar and Mr Thomson. The Pre-Action Protocol process, through no fault of Aldgate, continued into 2007 and there were discussions involving loss adjusters. Aldgate issued its proceedings

6 against Unibar on 6 November The position was therefore that throughout the post-fire period from 2005 to 2008 Aldgate had no funds available and no promise of funds from Unibar, Mr Thompson or either set of insurers. All they had was funds from the sale of No. 35, later from the sale of Plot 3 and finally and much later from the sale of the Ramsey Heights property. 12. There is abundant evidence to the effect, and I accept, that there were in 2005, 2006 and 2007 within the geographical area in which Aldgate operated a reasonable quantity of sites which were suitable for development both on a dual and single property basis. There were certainly sufficient to enable Aldgate, if it had the requisite funds from the previous developments available, to purchase a dual property site or as necessary single property sites in that period. The Issues 13. Liability being admitted by Unibar, Aldgate s case and evidence is to the effect that, if the fire had not happened at No 35, it would and could have sought to acquire Plot 1 at 2, Ermine Street failing which it would have acquired a single plot elsewhere. Once those plots had been developed and sold in between about June 2005 and May 2006, Aldgate say that it would have acquired another dual development site in mid-2006 and developed it and sold it within about 12 months. Thereafter the same process would have been completed between about September 2007 and August Aldgate compares this with what actually happened which in effect was, in terms of new development after the fire, the completion and sale of Plot 3 at Ermine Street and the Ramsey Heights property completed in December In effect, because Aldgate give credit for the profit earned on the Ramsey Heights property, Aldgate is effectively claiming that the profit which it has lost as a result of the fire relates to 4 properties which it was unable to develop over the period May 2005 to the autumn of Aldgate also say that it lost the additional profit which would have been associated with the economies of scale achieved by working on two properties on one site at a time. 14. Unibar accepts (through its Counsel in closing) that it was within the parties contemplation when contracting in the ordinary course of things that a fire at No 35 might cause Aldgate to lose an investment opportunity; it was also foreseeable that that might have knock on effects in terms of Aldgate s future trading (Paragraph 8 of written Closing Submissions). There is, properly, no issue that the type of loss claimed is in principle, subject to proof, recoverable in this case. It matters little therefore under which head of Hadley v Baxendale the loss falls in this case. Essentially, Unibar assert that as a matter of fact there was little or no chance that Aldgate would have acquired Plot 1, Ermine Street or indeed that it would or would have been in a position to acquire another separate plot until late in 2005 when it suggests No 35 would have been sold releasing funds for the new acquisition. Its primary position therefore is that there was no loss. Alternatively, the most which can be established on the facts would be the loss of one single plot development, it being asserted that Aldgate s projections for what would have happened in terms of acquisitions, obtaining outline or detailed planning permission, construction periods and sales periods are improbably optimistic. 15. There was, ultimately, acceptance on both sides that the proper measure of loss of profit per house to be developed was 153,008 and that, if there was a loss associated

7 with not being able to carry out dual property developments, it was 10% of that figure. A reservation was made by the Defendant in relation to the profits that would have been earned on the sale of a completed Plot 1, Ermine Street on the basis that a premium would have had to be paid for it. The Law 16. There has been much debate over the years, as there has been in this case, as to how one must analyse the extent to which different types of loss and the losses said to have been actually suffered in any given case are recoverable. One can break down the various steps which have to be taken in any given case on these topics as follows: (a) One first needs to ascertain whether the type or head of loss claimed is recoverable as a matter of law in the context of the facts of the given case. On this topic, one will have regard for instance in contract cases to the principles set out in Hadley v Baxendale (1854) 9 Ex 341 and to the opinion of Lord Hoffman in South Australia Asset Management Corporation v York Montague Ltd and others [1997] AC 191. A type or head of loss which is not recoverable is said to be too remote. (b) Next, one needs to determine as a matter of fact whether and to what extent loss within the recoverable types or heads of loss has actually been or will be incurred. That is causation and is a question of fact. There are variants on this such as the loss of chance or opportunity cases but even in those circumstances a claimant still has to establish as a matter of fact that it lost the chance or opportunity by reason of the breach of duty (contractual, statutory or tortious). The so-called but for test may be called into play. Remoteness of damage comes into consideration under this head but simply as a question of fact. Judges and lawyers sometimes also say that a particular loss actually suffered which was historically or otherwise so far removed from the breach of duty is too remote; that is another way of saying that causation of parts of the loss has simply not been proved on a balance of probabilities. (c) Finally, one comes to consider whether concurrent or later events (post breach) have caused some of the losses in such a way as to prevent the claimant recovering them or reduce the amount of recoverable loss. Into this category may come the new intervening act or force (novus actus interveniens) or in certain cases contributory negligence. 17. A number of authorities were cited which are of relevance in this case. The South Australia case involved different facts to the current case, namely negligent overvaluation of properties which went down in value after purchase in the later property recession. Lord Hoffman provided some useful insights into how one should approach damages: 14. A duty of care such as the valuer owes does not however exist in the abstract. A plaintiff who sues for breach of a duty imposed by the law (whether in contract or tort or under statute) must do more than prove that the defendant has failed to comply. He must show that the duty was owed to him and that it was a duty in respect of the kind of loss which he has suffered. Both of these requirements are illustrated by Caparo Industries Plc. v. Dickman [1990] 2 A.C.

8 605. The auditors failure to use reasonable care in auditing the company s statutory accounts was a breach of their duty of care. But they were not liable to an outside take-over bidder because the duty was not owed to him. Nor were they liable to shareholders who had bought more shares in reliance on the accounts because, although they were owed a duty of care, it was in their capacity as members of the company and not in the capacity (which they shared with everyone else) of potential buyers of its shares. Accordingly, the duty which they were owed was not in respect of loss which they might suffer by buying its shares. As Lord Bridge of Harwich said, at p. 627: "It is never sufficient to ask simply whether A owes B a duty of care. It is always necessary to determine the scope of the duty by reference to the kind of damage from which A must take care to save B harmless." In the present case, there is no dispute that the duty was owed to the lenders. The real question in this case is the kind of loss in respect of which the duty was owed. 18. Rules which make the wrongdoer liable for all the consequences of his wrongful conduct are exceptional and need to be justified by some special policy. Normally the law limits liability to those consequences which are attributable to that which made the act wrongful. In the case of liability in negligence for providing inaccurate information, this would mean liability for the consequences of the information being inaccurate. 19. I can illustrate the difference between the ordinary principle and that adopted by the Court of Appeal by an example. 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 climber goes on the expedition, which he would not have undertaken if the doctor had 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. 22. Your Lordships might, I would suggest, think that there was something wrong with a principle which, in the example which I have given, produced the result that the doctor was liable. What is the reason for this feeling? I think that the Court of Appeal s principle offends common sense because it makes the doctor responsible for consequences which, though in general terms foreseeable, do not appear to have a sufficient causal connection with the subject matter of the duty. The doctor was asked for information on only one of the considerations which might affect the safety of the mountaineer on the expedition. There seems no reason of policy which requires that the negligence of the doctor should require the transfer to him of all the foreseeable risks of the expedition. 23. I think that one can to some extent generalise the principle upon which this response depends. It is 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

9 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. This was a different case on its facts and involved the careless provision of information and advice, as opposed to something akin to the careless causing of a fire. The case goes primarily to the scope of a given duty. It does underline however a genuine concern about an award of damages which make the wrongdoer liable for all the consequences of his wrongful conduct. The further away in time the loss is from the breach of duty, the greater becomes the difficulty for a claimant to establish as a matter of fact that the loss is caused by the breach. 18. In The San Onofre [1922] P 243, after the defendant s ship had negligently collided with the claimant s ship, the latter, in trying to save the badly damaged defendant s ship by lashing her alongside and towing it inshore, grounded in fog and suffered more damage. Scrutton LJ said at page 253:...the question whether damage is sufficiently direct consequence of negligence to be recoverable, or is too remote, is rather a question of first impression. I am clear that if a negligent driver on the road injures himself in a collision with another vehicle, whose driver and a stranger thereupon take the injured man to hospital and meet with an accident in so doing, neither of them can recover damages for the accident from the negligent driver as consequences of his original negligence. Put another way, it is a question of fact and probability whether the later loss is caused by the original negligence. One has to be cautious about deciding cases on first impressions. Other cases such as Galoo v Bright Grahame Murray [1993] EWCA Civ 3 talk about causation being a matter of common sense; of course, that will generally be the case but, as ever, the claimant seeking to prove that any otherwise recoverable loss has actually been incurred must prove as a matter of fact on a balance of probabilities that the loss was caused by, or sufficiently causatively linked to, the relevant breach of duty relied upon. Judges will use their common sense and general experience in determining whether causation has been proved. 19. In Monarch Steamship Co Ltd v Karlshamms Oljefabriker A/B [1949] AC 196, the House of Lords considered a case where the failure to provide a seaworthy ship delayed arrival at the designated Swedish port until the outbreak of the Second World War with the result that the British Admiralty prohibited the ship from proceeding there and are required the cargo to be discharged in Glasgow. As a matter of fact, it should have been foreseen beforehand that war might break out. The loss claimed related to the fact that the cargo of soya beans had to be shipped in neutral vessels from Glasgow to Sweden at greater cost than would otherwise have been the case. The argument was that ultimately the non-delivery of the cargo was caused by the outbreak of war and not by the lack of seaworthiness. The House of Lords decided in effect that, because the outbreak of war was reasonably foreseeable and because the lack of seaworthiness had led to the delay in delivery, the loss claimed was recoverable. I am not convinced that this decision lays down any principles which are

10 directly applicable to this case other than that a reasonably foreseeable event which occurs after the breach of duty but which extends or causes the loss may well not break the chain of causation between the breach and the loss claimed. 20. In Jackson v Royal Bank of Scotland plc [2005] 1 WLR 377, the claimant (trading as Sansom ) imported goods from a company in Thailand ( Pet Products ) for onward sale to an English customer ( Economy Bag ) and payment for each delivery to that customer was by way of transferable letter of credit issued by the defendant bank to the customer naming the claimant as beneficiary. By mistake, the bank forwarded to the customer the Thai supplier s invoice which effectively revealed the claimant s substantial mark-up on the goods, in consequence of which the customer placed no further order with the claimant and bought the goods direct from the Thai supplier. The judge at first instance decided that but for the breach of duty the customer s relationship with the claimant would have continued for another four years and he allowed damages for lost of profit over those four years but reducing to reflect the fact that the customer would have sought to squeeze the claimant s profit margins and ultimately terminated the relationship. The Court of Appeal substituted a loss of profit for only one year. Lord Hope with whom the other law lords agreed said: 35. The first question is whether the Court of Appeal was wrong to limit the period for which damages were recoverable by reference to what was within the reasonable contemplation of the Bank at the time of the breach. Potter LJ said in para 31 that, whatever the judge's view was of the percentage chance that Samson would in fact in the following years have been Economy Bag's supplier of dog chews, the Bank's reasonable contemplation at the date of the breach introduced a cut-off point beyond which the Bank was not liable. He said that this was the effect of the rule as to remoteness in Hadley v Baxendale 9 Exch In my opinion there are two errors in this approach to the assessment of damages. This first may appear to be the somewhat technical point, that it is the date of the making of the contract, not the date of the breach, that was identified as the relevant date in Hadley v Baxendale. I say that it may appear to be somewhat technical because in this case the date of the making of the contract and the date of the breach were only about two months apart. There is no evidence that the facts that were relevant to what the Bank had in reasonable contemplation changed to any significant extent between 22 January 1993 when the letter of credit was issued and 15 March 1993 when the Bank sent Pet Products' invoice to Economy Bag. But the error was an error of principle. The choice of dates is more important than the differences, if any, in those facts. The parties have the opportunity to limit their liability in damages when they are making their contract. They have the opportunity at that stage to draw attention to any special circumstances outside the ordinary course of things which they ought to have in contemplation when entering into the contract. If no cut-off point is provided by the contract, there is no arbitrary limit that can be set to the amount of the damages once the test of remoteness according to one or other of the rules in Hadley v Baxendale has been satisfied. 37. The second error flows from the first. The Bank did not include any provision in the letter of credit limiting its liability for the loss of repeat business to any particular period. So the only limit on the period of its liability is that which the

11 trial judge identified. This is when, on the facts, the question whether any loss has been sustained has become too speculative to permit the making of any award. He held that as time passed it was increasing likely that Economy Bag would have acquired the motive and the means to squeeze Samson's profit margins and would ultimately have ended their business relationship. Miss Andrews did not challenge this approach, although she contended that the judge should have extended his award over a longer period. It seems to me that it is amply supported by the facts of the case. Samson were in a precarious position. Mr Taylor knew who the suppliers were and he had met Mr Veerachai. He knew where he could be contacted. It was only a matter of time before the harsh reality of doing business persuaded him that he should take a closer interest in what his arrangements with Samson were costing him and ask himself whether those costs could be cut down and perhaps eliminated. 21. What one can draw from these various cases, at least in the context of the current case, is the following: (a) One must first determine whether the type or kind of loss claimed falls within either category or limb of Hadley v Baxendale. (b) If and to the extent that it does, one must then determine simply as a matter of fact on the balance of probabilities what loss of that type or kind has actually been caused by the breach of contract, in this case the fire. (c) If all or any part of that established loss is caused by another event, which may or may not be the fault of the claimant, but which was not reasonably foreseeable by the defendant as at the date of the contract with the claimant, the loss may not be recoverable. 22. So far as the but for test is concerned, it is (almost) axiomatic that all recoverable losses proved to have been caused by the breach of duty would not have been incurred but for the breach of duty. It does not follow from this logic that all losses incurred which would not have been incurred but for the breach of duty are necessarily recoverable or will necessarily have been caused by the breach of duty. One can take an example of a taxi driver effectively employed by a claimant to drive him to a shop, which sells lottery tickets; the claimant is planning to buy a lottery ticket on the basis of the numbers of his date of birth but by reason of the taxi driver s negligence is injured and, because he has to go to hospital, he does not buy the lottery ticket which he would have bought; the lottery draw on that day, for which the prize is 10 million, just happens to be for the numbers comprised in the claimant s birth date. But for the negligence of the taxi driver, the claimant would have won 10 million. However that does not mean that the claimant will recover the 10 million. The loss may be essentially irrecoverable for the twin reasons that it is not within the reasonable contemplation of the parties as being the type of loss which can or should be recovered and that factually the loss cannot be considered to have been caused by the negligence. Similarly, if a claimant suffers business disruption as a reasonably foreseeable consequence of the breach of contract in question, it will not be able to recover all business disruption which follows which merely might not have been suffered if the breach had not occurred. There can be no presumption of fact that all losses within a recoverable category which are incurred after the breach by the claimant are caused by the breach. It is necessary factually to analyse the facts and the

12 history to see if on a balance of probabilities the losses at different stages were caused by the initial breach. The onus of proof remains on the claimant seeking to establish the losses. Of course it is open to the Court to make appropriate inferences of fact as well. 23. I must then turn to the loss of a chance cases because it is claimed that Aldgate lost the opportunity to secure a second plot at 2, Ermine Street. It is unnecessary to do more than consider the case of Allied Maples Group Ltd v Simmonds & Simmonds [1995] 1 WLR 1602 and in particular the authoritative judgement of Lord Justice Stuart-Smith. This was a case involving solicitors negligence and involved a consideration in the context of damages as to what the claimant would or would not have done or been able to do if there had been no negligence. Stuart-Smith LJ effectively identified three different types of situation: In these circumstances, where the Plaintiffs' loss depends upon the actions of an independent third party, it is necessary to consider as a matter of law what it is necessary to establish as a matter of causation, and where causation ends and quantification of damage begins. 1. What has to be proved to establish a causal link between the negligence of the Defendants and the loss sustained by the Plaintiffs depends in the first instance on whether the negligence consists on some positive act or misfeasance, or an omission or non feasance. In the former case, the question of causation is one of historical fact. The Court has to determine on the balance of probability whether the defendant's act, for example the careless driving, caused the plaintiff's loss consisting of his broken leg. Once established on balance of probability, that fact is taken as true and the plaintiff recovers his damage in full. There is no discount because the judge considers that the balance is only just tipped in favour of the plaintiff; and the plaintiff gets nothing if he fails to establish that it is more likely than not that the accident resulted in the injury. Questions of quantification of the plaintiff's loss, however, may depend upon future uncertain events. For example, whether and to what extent he will suffer osteoarthritis, whether he will continue to earn at the same rate until retirement, whether, but for the accident, he might have been promoted. It is trite law that these questions are not decided on a balance of probability, but rather on the court's assessment, often expressed in percentage terms, of the risk eventuating or the prospect of promotion, which it should be noted depends in part at least on the hypothetical acts of a third party, namely the plaintiff's employer. 2. If the defendant's negligence consists of an omission, for example to provide proper equipment, given proper instructions or advice, causation depends, not upon a question of historical fact, but on the answer to the hypothetical question, what would the plaintiff have done if the equipment had been provided or the instruction or advice given. This can only be a matter of inference to be determined from all the circumstances. The plaintiff's own evidence that he would have acted to obtain the benefit or avoid the risk, while important, may not be believed by the judge, especially if there is compelling evidence that he would not. In the ordinary way, where the action required of the plaintiff is clearly for his benefit, the court has little difficulty in concluding that he would

13 have taken it. But in many cases the risk is not obvious and the precaution may be tedious or uncomfortable, for example the need to use eardefenders in noisy surroundings or breathing apparatus in dusty ones. It is unfortunately not unknown for workmen persistently not to wear them even if they are available and known to be so Although the question is a hypothetical one, it is well established that the plaintiff must prove on balance of probability that he would have taken action to obtain the benefit or avoid the risk. But again, if he does establish that, there is no discount because the balance is only just tipped in his favour 3. In many cases the plaintiff's loss depends on the hypothetical action of a third party, either in addition to action by the plaintiff, as in this case, or independently of it. In such a case does the plaintiff have to prove on balance of probability, as Mr Jackson submits, that the third party would have acted so as to confer the benefit or avoid the risk to the plaintiff, or can the plaintiff succeed provided he shows that he had a substantial chance rather than a speculative one, the evaluation of the substantial chance being a question of quantification of damages? Although there is not a great deal of authority, and none in the Court of Appeal, relating to solicitors failing to give advice which is directly in point, I have no doubt that Mr Jackson's submission is wrong and the second alternative is correct The learned judge then went on to consider the loss of opportunity cases in this category such as Chaplin v Hicks [1911] 2 KB 786 and later Davies v Taylor [1995] AC 207 and said at page 1614 C: In that case the Court was not concerned to distinguish between causation and quantification of loss. But, in my judgment, the plaintiff must prove as a matter of causation that he has a real or substantial chance as opposed to a speculative one. If he succeeds in doing so, the evaluation of the chance is part of the assessment of the quantum of damage, the range lying somewhere between something that just qualifies as real or substantial on the one hand and near certainty on the other. I do not think that it is helpful to seek to lay down in percentage terms what the lower and upper ends of the bracket should be. This is all self-explanatory. Discussion 24. Primarily, this Court has to determine what would, on the balance of probabilities, have happened in terms of Aldgate s trading activities of purchasing, developing and selling properties if there had been no fire. I have accepted on the balance of probabilities that Aldgate s practice and policy (indeed being followed on the development at Nos 33 and 35, Cambridge Road) was dual property development and that that is what it would have proceeded with if it could thereafter. It then becomes necessary to determine on the balance of probabilities and as necessary weighing up the percentage chances as to:

14 (a) whether Aldgate would have been able to and would have proceeded on the dual property development at 2, Ermine Street, (b) if so, for how long and between what approximate dates up until sale of the properties that development would have proceeded, (c) if not, for how long and between what approximate dates up until sale, for Plot 3, Ermine Street and another separate property, those developments would have proceeded, (d) depending on the answers to (b) or (c), whether, and if so, when and between what approximate dates up until sale another dual property or separate properties development would have been undertaken. (e) depending on the answer to (d) whether, and if so, when and between what approximate dates up until sale a further dual property or separate properties development would have been undertaken. 25. To consider this, it is first necessary to consider the evidence as to how long a development would probably take for the types of property with which Aldgate was likely to be involved (namely, developments not dissimilar to Nos 33 and 35, Cambridge Road). Mr Shipp gave evidence that the actual construction period would typically be between 7 to 10 months per property. Against that, Unibar points to the 12 months taken on the Ramsey Heights project; Mr Shipp said in evidence that there were some particular problems there and he mentioned the need to provide piled foundations as opposed to normal strip footings. That, however, seems to point at least to the risk on any given development that some problems may arise which may impact on the construction period; the TCC has extensive experience in numerous other cases of the sort of problems that can arise, ground conditions merely being one. Aldgate s experience on No 33 and 35 Cambridge Road before the fire demonstrates that other business could get in the way: the construction spanned a period of over 20 months because Aldgate decided to do other work in effect simply as a contractor on three projects in between starting and completing the work on Nos. 33 and 35. There is no evidence that other such opportunities arose after the fire. Plot 3 at Ermine Street took some 14 months to construct albeit divided by the three months used by Aldgate to concentrate on rebuilding No. 35, Cambridge Road; it is unsurprising that Plot 3 took somewhat longer than usual given that experience would suggest extra time is spent mothballing and then restarting a construction project. The three months taken to rebuild No. 35 shows that intense concentration by Aldgate could work to a shorter construction period although that period did not include the footings or the floor slab which were retained and at least some of the landscaping work. 26. Mr Liddell suggested that it would be helpful to take an average construction period from the times taken by Aldgate historically in constructing the various properties. Whilst it would be helpful if one had relevant data, the figures used by him to create an average period for construction of the 15 months were unrealistic. For instance, he built into his final calculation a 78 week period for the original construction of No. 35 Cambridge Road; this was a false figure by reason of the evidence that the construction period was interrupted by three other projects: it does not reflect what an uninterrupted construction period would be. Similarly, he built in the 17 week period for the reconstruction of No. 35 when it is clear that (a) it did not include for site

15 clearance and the construction of footings and the ground floor slab and, possibly, landscaping and (b) the evidence was that there was an intense concentration by Aldgate on carrying out the reconstruction works which would probably not have been present in the ordinary course of events. 27. One then needs to consider how long planning permissions and design work will take from purchase to the commencement of construction. In one sense, this period is as short as it may be long. Some properties may be brought with or without outline or detailed planning permission. Planning permission, allowing for a design period and pre-application discussions with planners may take many months if there are objections and there have to be appeals; if there are no real problems, a period of two months may suffice. Mr Bussetil said that it took some 6-7 weeks between application and permission being granted for Plot 2, Ermine Street, but that did not allow for a design period and consultations with planners. 28. So far as the period between completion of construction and sale of the dwelling is concerned, in theory that could be anything between one or two weeks if a purchaser was lined up before construction was completed and many months if one or more purchases fell though. The housing market was throughout 2005 through to some time in 2008 buoyant. The rebuilt No. 35, Cambridge Road took 6 months to sell after construction whilst Plot 3, Ermine Street took some 12 months. No. 33 took only several weeks. 29. The Court needs to determine how long the whole process would probably take. I am satisfied on all the evidence that the whole process would take about 19 months for a dual development over the period after the fire and up to My reasons for taking these periods as representative are as follows: (a) A period of about 3 months from purchase to commencement of work is a realistic period taking into account the need to review, and as necessary obtain, any requisite planning permissions. There was a variety of properties on the market ranging from those which had no planning permission, to those which had outline or detailed planning permission. Even if outline permission had been obtained by the vendor, details would still remain to be agreed with and approved by the planning authority. Aldgate s own evidence suggests a period of two months. (b) A period of 12 months for construction is also a realistic period which allows for the many contingencies which arise on building developments, such as problems with ground conditions (such as were experienced on the Ramsey Heights development) as well as the need to divert resources from time to time elsewhere. There was no suggestion that there were any particular problems which Aldgate faced in the construction of Plot 3, Ermine Street, apart from the suspension of work for three months whilst No. 35 was rebuilt; still a construction period of 14 months was needed on that, only part of which can have related to the need to mothball and then later recommence work before and after the suspension. (c) The sale period after construction is completed would be anything between several weeks and six months. It is likely that this could be shortened if Aldgate wanted to shorten it by, for instance, by reducing the purchase price and securing

16 a lockout agreement with a purchaser. A four-month period is realistic and allows for the potentially slower sale outside what the evidence suggested was the best selling period of Spring and early Summer. (d) This produces a period of about 19 months. This period also allows for the fact that, as on Nos. 33 and 35, Cambridge Road, the two parts of the dual development will often be completed and sold at different times with the result that the process of moving onto the next dual development is somewhat delayed pending the disposal of the later of the two parts. It is of course possible that the different parts of the process of buying, developing and selling would be more or less than the times which I have allotted but the 19 month period represents the realistic probability of how long the process would have lasted. 30. I next turn to consider what the percentage chances were that Aldgate would have purchased Plot 1 at Ermine Street, if there had been no fire. I put those chances at 50% because there would have been a straight contest between Aldgate and the Stockleys who appear to have been interested in the property from about March. The latter were prepared to pay 182,500 and were clearly in a position to exchange and complete (as turned out to be the case) in June Aldgate would undoubtedly have to have been prepared to pay more than that. The other complicating factor is that, if there had been no fire, Aldgate would have preferred not to acquire Plot 1 until it had sold No. 35, Cambridge Road, albeit I accept Mr Shipp s oral evidence that, if Aldgate had realised that it was facing competition, it had the funds to and would have tried to acquire Plot 1 before the sale of No. 35. Ultimately, Mr Bussetil s approach as to who he would have sold it to was a commercial one which depended on who would offer a higher price and who could exchange and complete first. In the circumstances, I cannot say that Aldgate s chances were any more or less than 50%. What however is clear is that if Aldgate had acquired it, it would have had to pay at least 10,000 more than the Stockleys had offered. I will return to the quantification of this loss later. If it had bought Plot 1, this would have been no later than June 2005 but construction would not have commenced before about September If Aldgate had not purchased Plot 1, Ermine Street, I am satisfied on a balance of probabilities that it would have acquired a single property for development elsewhere and that this would have happened in time to enable the construction to commence in about September Applying the likely times for planning, design, construction and sale, the following emerges: (a) whether two plots were developed at Ermine Street or simply one plot at Ermine Street and one plot elsewhere, both developments would have taken 19 months starting in about July 2005 through to sale in about February (b) Allowing about two months after the sale of the first two plots (the period allowed for in Aldgate s expert calculations), a further dual development site would in all probability had been acquired in about April 2007 with sales completed by about November (c) Thus, because in fact Aldgate did develop one plot at Ermine Street (Plot 3), Aldgate has lost the ability to effect three developments, one broadly parallel in