Ipsofactoj.com: International Cases [2001] Part 4 Case 15 [CAEW]


COURT OF APPEAL, ENGLAND & WALES

Coram

Bond Pearce

(a firm)

- vs -

Estate of NA Tresawna

(by Willian Corbett as administrator of the Estate)

LORD JUSTICE BROOKE

LORD JUSTICE LONGMORE

SIR CHRISTOPHER SLADE

11 APRIL 2001


Judgment

Sir Christopher Slade

  1. The claimant, Mr. Corbett, in his capacity as the sole personal representative of the late Miss N.A. Tresawna ("the Testatrix") seeks to recover damages for negligence from the defendant firm of solicitors, Messrs Bond Pearce. Eady J was asked to determine certain preliminary issues in the action. When the hearing began, he made an order for determination of those issues and subsequently gave a judgment on them, dated 25th May 2000. With leave of the Judge, the claimant appeals to this Court from that judgment, which is now reported at [2000] Lloyds Rep PN 805. The Judge had before him a Statement of Agreed Facts from which I take most of the facts, supplementing them with a few others which I believe to be common ground.

  2. On 3rd February 1989, the Testatrix executed a valid will (the "February will") disposing of her estate. By this will (among other provisions)

    1. she appointed John Somerville, Glending Wight and John Foster to be her executors;

    2. she devised her property "Lamellyn" to her niece, Mrs. Arthur;

    3. she devised her property "Tolcarne" to her nephew, the claimant; and

    4. she left the residue of her estate to Mrs. Arthur and the claimant with gifts over in favour of Mrs. Arthur's infant sons, James and Jonathan.

  3. Later in 1989, the Testatrix decided that she wished to dispose of her property rather differently. In September 1989, she accordingly retained the defendant firm of solicitors ("the defendants") to advise and act for her in relation to her affairs. She instructed them that she wished

    1. to make a lifetime gift of Lamellyn to Mrs. Arthur, instead of a testamentary gift;

    2. to make a lifetime gift of Tolcarne to the claimant, instead of a testamentary gift;

    3. to make a new will taking account of these proposed lifetime gifts, appointing John Newey and David Bennett as her executors in place of the executors named in the February will and leaving the residue of her estate to James and Jonathan Arthur.

    She instructed the defendants to draw up on her behalf a new will and two deeds of gift accordingly.

  4. In the event, the proposed new will was ready for execution before the proposed deeds of gift. On 22nd September 1989, the defendants, having previously sent to the Testatrix a draft of the proposed new will, sent to her a fair copy, together with instructions for signing and dating. On or about 27th September 1989, the Testatrix signed but did not date this will (the September will"), which contained no specific gifts in relation to Lamellyn and Tolcarne, but after certain specific and pecuniary bequests devised and bequeathed

    1. her properties at Truck and Probus, Cornwall, to Mrs. Arthur;

    2. her home, Myrtle Cottage, to the claimant;

    3. her residuary estate to James and Jonathan Arthur.

  5. The provisions of the September will were in accordance with the Testatrix's wishes. But the reason why she did not date it when she signed it, as the defendants knew, was that she did not wish it to take effect on her death until the lifetime gifts of Lamellyn and Tolcarne, in favour of Mrs. Arthur and the claimant respectively, were complete. The deeds of gift of these two properties were duly executed on 25th December 1989. Shortly thereafter, and in any event by 29th December 1989, Mr. Nicholson of the defendants appended the date 26th December 1989 to the September will. It is common ground that the defendants' failure to procure the execution by the Testatrix of a valid will on the terms of the September will or to procure such a will that could be admitted to probate without a probate action was a breach of contract by, and negligence on the part of the defendants.

  6. The Testatrix died on 6th February 1991 without having executed any further testamentary document. For probate purposes her estate was valued at 353,761 net. Her residuary estate included the properties at Truck and Probus, Myrtle Cottage and other assets. If the September will was invalid, the whole of her residuary estate would pass to the claimant and Mrs. Arthur in equal shares. This would not give effect to the Testatrix's intentions because, as soon as the two deeds of gift had been executed, she intended that the benefits received by the claimant and Mrs. Arthur from her estate should be limited to Myrtle Cottage and the Truck and Probus properties respectively and that the other residue should go to James and Jonathan Arthur.

  7. Following the Testatrix's death, the claimant objected to the admission to probate of the September will. On 5th June 1992, he instituted proceedings ("the Will action"), to have the September will declared invalid on the ground that the Testatrix had lacked the requisite testamentary intention at the date when she signed it and to obtain an order that the February will be admitted to probate. In this action, Mr. Newey, one of the executors named in the September will, sought to uphold the validity of that will, with the benefit of an indemnity as to the costs of the proceedings from the Solicitors' Indemnity Fund. On 5th May 1994, Mr. Eben Hamilton QC (sitting as a Deputy Judge of the Chancery Division) pronounced for the validity of the September will.

  8. On 31st August 1995 and 4th September 1995 respectively, Mr. Somerville and Mr. Foster renounced probate in relation to the February will. (Mr. Wight had by then died). Following these renunciations, the claimant became one of those entitled to a grant of letters of administration with the February will annexed, if it was held valid. He appealed against the Deputy Judge's decision. On 26th January 1996, the Court of Appeal allowed the appeal, holding that the September will was invalid by reason of the lack of testamentary intention on the part of the Testatrix at the time of its execution and ordering that the February will be admitted to probate.

  9. Subsequently, on 15th February 1996, the Court of Appeal ordered that

    1. the costs of all parties in that court and the court below should be paid out of the estate;

    2. the Executors' costs be taxed on an indemnity basis;

    3. the claimant, not the estate, should pay certain costs of the Solicitors' Indemnity Fund incurred by reason of an unsuccessful application by the claimant for an order that the Fund should pay the costs of the Will action.

    The costs payable out of the estate pursuant to this order amount to some 150,000. An application was made to the Court of Appeal in March 1999, when an order was made, subject to certain undertakings, which had the effect of staying the costs order made in 1996 until after the outcome of the present proceedings. The claimant was faced with the problem that, if Mr. Newey's costs had to be paid without any such delay, he would have to realise certain assets which the beneficiaries might wish to retain - as well as creating a liability to Capital Gains Tax. The loss and inconvenience could never be compensated for by the reimbursement of those costs if these proceedings were successfully concluded. It was that timing problem that the Court was concerned to alleviate by the order made on that occasion.

  10. In August 1995, before the determination of the Will action, Jonathan and James Arthur issued proceedings against the defendants ("the Disappointed Beneficiaries' action") to recover damages on the footing that in September 1989 the defendants had owed them a duty of care in tort as the Testatrix's intended beneficiaries, by virtue of the principle in White v Jones [1995] 2 A.C. 207. In their amended statement of claim, they alleged that the Defendants were in breach of that duty in failing to ensure that the September will was validly executed by the Testatrix, and that such breach had caused them damage.

  11. These proceedings were eventually settled in December 1997 on the basis of the payment to James and Jonathan Arthur ("the Disappointed Beneficiaries") of 275,000, representing the full amount of their claim with interest. It is common ground that this sum was calculated by reference to the amount of the net residuary estate of the Testatrix undiminished by the costs of the Will action.

  12. On 21st September 1995, before this settlement was concluded, the claimant had issued a writ in the present proceedings asserting a claim against the defendants as a beneficiary under the February will. At the date of the settlement, the defendants were aware that this writ had been issued but that with the permission of the Court it had been amended in October 1997 by withdrawing any claim by the claimant as beneficiary under the February will and substituting a claim as the Testatrix's administrator. He had obtained a grant dated 28th October 1996 of letters of administration with the February will annexed.

  13. In the light of the agreed facts, Eady J was asked to determine the following issues:

    (1)

    In the above circumstances, is the claimant, as personal representative of Miss Tresawna, able to recover damages for breach of contract or for negligence against the defendant firm by reference to the loss suffered by the estate by reason of either or both of the following:

    (a)

    the diminution of the value of the estate attributable to the costs payable in the Will action; or

    (b)

    any other loss or liability incurred by the estate as a result of the Will action, the costs order made in the Will action and the delay in the administration of estate caused by the defendant's breach of contract and negligence?

    (2)

    Does the answer to the question posed in paragraph (1) above, or any part of it, depend upon whether the estate, after payment of the liabilities referred to in sub-paragraphs (a) and (b), would contain sufficient assets to discharge all the creditors of the estate, distribute specific legacies and still leave a balance to form a residue for distribution in accordance with the terms of the February will?

  14. By his judgment of 25th May 2000, Eady J answered question 1(a) and 1(b) above in the affirmative and question 2 above in the negative.

  15. While the defendants suggested in argument that there will be a residue for distribution in accordance with the terms of the February will, this is not at present accepted by the claimant. The effect of the defendants' negligence, in financial terms, on the estate of the Testatrix has yet to be determined.

    THE LEGAL BACKGROUND

  16. The law in this field has in recent years developed in stages. Before turning to the judgment of Eady J it may be convenient to refer to a few of the relevant authorities. Until 1953, it was uncertain whether an action of the present kind, brought by the personal representative of a deceased person against the deceased's solicitor, could ever give rise to a claim for substantial damages. That question was answered in the affirmative in Otter v Church Adams Tatham & Co [1953] Ch 280. In that case the plaintiff, as sole administratix of her son Michael, who had died on active service intestate, sued the defendant solicitors for negligence. She claimed that in breach of their duty to exercise care and skill as solicitors, they had failed to advise her, acting as the agent of Michael, that his interest in certain settled property was an entailed interest and, that having recently attained 21, he was in a position to disentail and make the property his own. Upjohn J, having found that the plaintiff had established a breach of contract by the defendants, then had to consider the measure of damages. It was argued on behalf of the defendants that a personal representative can have no better rights than the person he represents and that, since Michael could have received no more than nominal damages in his lifetime, the plaintiff, as his personal representative, could have no better claim than that. Upjohn J, having stated (at p. 287) that the matter was "admittedly free from authority", held (at p. 288) that the right of action which had previously been vested in Michael vested in his personal representative and that the damage had to be ascertained in accordance with principles affecting damages for breach of contract "at the time that the damage accrues".

  17. No decision has been brought to our attention in which the correctness of the decision in Otter v Church Adams Tatham & Co has been questioned. In the present case, since negligence on the part of the defendants, involving a breach of duty to the Testatrix, is admitted by the defendants, the claimant, as her personal representative, has, at least at first sight, a good cause of action. But the damages fall to be ascertained at the time when the damage accrued after her death. And the problem is to determine where the burden of that damage truly fell.

  18. In White v Jones [1995] 2 AC 207 the negligent delay of a firm of solicitors in carrying out the instructions of a testator for a new will was followed by the death of the testator before the will had been executed. The plaintiffs, who would have benefited under the new will, brought a claim against the solicitors in negligence. Their Lordships had to consider for the first time the correctness or otherwise of the decision in Ross v Caunters (a firm) [1980] Ch 297, in which case Sir Robert Megarry V-C had upheld a claim in negligence brought against solicitors by a disappointed beneficiary under a will which, owing to the solicitors' negligence, had not been properly attested. The principal issue falling for decision by the House of Lords in White v Jones, as described by Lord Goff of Chieveley [1995] 2 AC at p. 254, was "whether in the circumstances of cases such as Ross v Caunters and the present case the testator's solicitors are liable to the disappointed beneficiary". The majority approved the decision in Ross v Caunters and held that they were liable. Lord Goff, who was one of the majority, and with whose reasons Lord Browne-Wilkinson and Lord Nolan agreed (at pp. 276 and 295) explained a primary consideration which led him to conclude that a duty of care should be owed by the testators' solicitor to a disappointed beneficiary as follows (at pp. 259-260):

    In the forefront stands the extraordinary fact that, if such a duty is not recognised, the only persons who might have a valid claim (i.e. the testator and his estate) have suffered no loss, and the only person who has suffered a loss (i.e. the disappointed beneficiary) has no claim: see Ross v Caunters, [1980] Ch 297, 303A per Sir Robert Megarry V-C. It can therefore be said that, if the solicitor owes no duty to the intended beneficiaries, there is a lacuna in the law which needs to be filled. This I regard as being a point of cardinal importance in the present case.

    Lord Goff expressed his conclusion thus (at p. 268):

    In my opinion, therefore, your Lordships' House should in cases such as these extend to the intended beneficiary a remedy under the Hedley Byrne principle [Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] A.C. 465] by holding that the assumption of responsibility by the solicitor towards his client should be held in law to extend to the intended beneficiary who (as the solicitor can reasonably foresee) may, as a result of the solicitor's negligence, be deprived of his intended legacy in circumstances in which neither the testator nor his estate will have a remedy against the solicitor.

  19. In Carr-Glynn v Frearsons [1999] Ch 326 a testatrix had executed a will drawn up by the defendants' solicitors in which she left the plaintiff, her niece, her share in a property which the testatrix owned jointly with her nephew. She subsequently died without having severed the joint tenancy. On her death her share in the property thus automatically vested in the nephew as surviving joint tenant, and the gift in the will to the plaintiff was ineffective. The plaintiff sued the defendants claiming damages for breach of a duty of care owed to her to ensure that the testatrix was properly advised of the need to sever the joint tenancy, in order for the gift in the will to take effect. Lloyd J dismissed the claim, holding that the defendants had not been negligent and that, in any event, where a solicitor's breach of his duty of care to a testatrix in preparing her will resulted in a loss to the estate, the solicitor owed no duty of care to an intended beneficiary under the will, whose gift was thereby rendered ineffective.

  20. The Court of Appeal allowed the plaintiff's appeal. Chadwick LJ, who delivered the leading judgment and with whose reasoning Thorpe LJ and Butler-Sloss LJ agreed, having found negligence on the part of the defendants, proceeded to consider the question of duty of care. He referred (at p. 333 D-E) to the second of the two passages from Lord Goff's judgment in White v Jones cited above and said this (at pp. 333F to 334A):

    At first sight the facts in the present case take it outside the principle as stated by Lord Goff. This is a case in which the estate itself would have a remedy.

    The question, therefore, is whether the remedy which the House of Lords was prepared to extend to a disappointed beneficiary in White v Jones [1995] 2 A.C. 207 is confined to those cases, of which White v Jones was an example, in which the estate itself has no remedy - so that, absent a remedy at the suit of the beneficiary, there is no remedy at all; or is to be further extended to cases in which the estate does have a remedy but where the estate's remedy will be of no advantage to the disappointed beneficiary, [because the estate's remedy would have enured for the benefit of residue instead of the disappointed specific legatee].

    The Judge answered the question in the negative. He said [1997] 2 All E.R. 614, 628:

    It seems to me unacceptable that solicitors should be at risk of two separate claims for identical loss at the suit both of the personal representatives and a beneficiary, when recovery by one would not bar recovery by the other.

    I agree. If that were the result which the law required it would properly be regarded as unacceptable and unjust. But, as it seems to me, it ought properly [to] be regarded as equally unacceptable and unjust if the result which the law requires is that, because of the solicitors' negligence, the loss which the personal representatives are able to recover on behalf of the estate passes to someone who was not the beneficiary intended by the testatrix; leaving the intended beneficiary without recompense.

  21. A little later Chadwick LJ observed (at p. 334C to D)

    If the law in this field is to reflect what would generally be recognised as acceptable and just the application of the relevant principles should lead to the result that the estate and its beneficiaries are restored to the position in which they would have been if the solicitors had not failed in their duty to the testatrix.

    After pointing out (at p. 336A to B) that, on a proper analysis, the service of a notice of severance was part of the will-making process and that the plaintiff was as much an intended beneficiary as she was of the specific gift in the will, he said (at p. 336B to C):

    I am satisfied that, subject to the need to avoid the injustice of imposing double liability on the solicitors, it would be consistent with the approach of the majority of the House of Lords in White v Jones [1995] 2 A.C. 207 to recognise that the plaintiff is a person in relation to whom the assumption of liability by the defendants towards their client, the testatrix, ought to be extended.

  22. However, Chadwick LJ twice repeated the point (at p. 336F to G and at 336H to 337A) that it could not be right to fashion a remedy to avoid injustice to the disappointed legatee if that itself would lead to the injustice of imposing a double liability on the solicitors, by exposing them to claims for loss of the relevant property at the suit of both the personal representatives and the specific legatee. He gave his answer to this problem in the following passage which is of crucial importance in the present case (at p. 337B to 338B):

    The key, as it seems to me, is to recognise that, in a case of this nature, the duties owed by the solicitors are limited by reference to the kind of loss from which they must take care to save harmless the persons to whom those duties are owed: see per Lord Bridge of Harwich in Caparo Industries Plc v Dickman [1990] 2 A.C. 605, 627, cited by Lord Hoffmann in Banque Bruxelles Lambert S.A. v Eagle Star Insurance Co. Ltd [1997] A.C. 191, 212. The duty owed by the solicitors to the testator is a duty to take care that effect is given to his testamentary intentions. That is the context in which the duty to take care to ensure that the relevant property forms part of the estate arises. The duty in relation to the relevant property is a duty to take care to ensure that that property forms part of the testator's estate so that it can pass to the intended beneficiaries on his death. It is not in contemplation, in a case of this nature, that the testator will dispose of the property in his lifetime. The loss from which the testator and his estate are to be saved harmless is the loss which those interested in the estate (whether as a creditors or as beneficiaries) will suffer if effect is not given to the testator's testamentary intentions.

    The duty owed by the solicitors to the specific legatee is not a duty to take care to ensure that the specific legatee receives his legacy. It, also, is a duty to take care to ensure that effect is given to the testator's testamentary intentions. The loss from which the specific legatee is to be saved harmless is the loss which he will suffer if effect is not given to the testator's testamentary intentions. That is the loss of the interest which he would have had as a beneficiary in an estate comprising the relevant property.

    The duties owed by the solicitors to the testator and to the specific legatee are not inconsistent. They are complementary. To the extent that the duty to the specific legatee is fulfilled, the duty to the testator is cut down. If and to the extent that the relevant property would have been distributed to the specific legatee in the ordinary course of administration, the other persons interested in the estate can suffer no loss. In so far as the relevant property or any part of it would have been applied in the ordinary course of administration to discharge liabilities of the estate, the specific legatee can suffer no loss.

    To impose duties on the solicitors which enabled both the personal representatives and the specific legatee to receiver for the loss of the relevant property would involve both double recovery and double liability. The duties would not be commensurate with the loss against which the persons to whom they were owed were to be saved harmless. But there is no reason in principle, as it seems to me, why, in cases of this nature, the law should not impose complementary duties; so that for breach of the one the specific legatee is enabled to recover the loss which he has suffered and for breach of the other the personal representatives are enabled to recover, and recover only, the loss suffered by the other persons interested in the estate. Justice will be done to each of the three interests concerned - the specific legatee, the estate and the solicitors - if solicitors who, in the course of carrying out the testator's testamentary instructions, have failed to take care to ensure that the relevant property forms part of the estate are liable to compensate the specific legatee for the loss which he has suffered as a result of the breach of duty owed to him; and are liable to compensate the estate for the loss (if any) suffered by the other persons interested in the estate for breach of the duty owed to the testator.

  23. As will have appeared, the problem facing the court in the Carr-Glynn case was that of reconciling its desire to recompense the disappointed specific legatee for the loss of the half share in the property, in accordance with what it considered the just application of the principle of White v Jones, while at the same time ensuring that the defendant solicitors would not be exposed to a claim by the testatrix's personal representatives for the same loss, which the Court considered would be obviously unjust. The Court met this problem by an analysis of the duty owed by the solicitors to the testatrix in the light of the principles stated by Lord Bridge and by Lord Hoffmann. This duty, it considered, was a duty to take care that the property formed part of the Testatrix's estate, so that it could pass to the specific legatee on her death; the loss from which the Testatrix and her estate was to be saved harmless was the loss which those interested in her estate, whether as the specific legatee or as creditors, would suffer if, as a result of the solicitors' negligence, effect could not be given to her testamentary intentions. It is in my judgment necessarily implicit in the judgment of Chadwick LJ that the court would have regarded the personal representatives themselves as having no right of recovery in respect of the lost half share of the relevant property, at least if the estate was solvent. Any such recovery would have enured for the benefit of the residuary beneficiary rather than the intended specific legatee. The court's objective was to ensure that the compensation ultimately found its way to the pocket where the loss had ultimately fallen.

  24. Still more recently, in Worby v Rosser [1999] Lloyds Rep. PN 814, proceedings were brought by three beneficiaries under a will made in 1983 against a solicitor who prepared a later will which, after contested proceedings, was refused probate. The plaintiffs sought to recover from the solicitor the substantial costs which they incurred in resisting probate of the later will. It was said that the solicitor owed a duty to them as beneficiaries named in the 1983 will to take care that the testator did not execute a later will in which he lacked testamentary capacity and was subject to the malign influence of a third party. The Court of Appeal rejected the claim, holding that there was no lacuna which required to be filled, as there had been in White v Jones and the Carr-Glynn case. In the words of Chadwick LJ (at page 978):

    If the solicitor's breach of duty under his retainer has given rise to the need for expensive probate proceedings, resulting in unrecovered costs, then, prima facie, those costs fall to be borne by the estate for the reasons which I have already sought to explain. If the estate bears the costs thereby and suffers loss then, if there is to be a remedy against the solicitor, it should be the estate's remedy for the loss to the estate. There is no need to fashion an independent remedy for a beneficiary who has been engaged in the probate proceedings. His or her costs, if properly incurred in obtaining probate of the true will, can be provided for out of the estate. If there has been a breach of duty by the solicitor, the estate can recover from the solicitor the additional costs (including the costs to which the beneficiary is entitled out of the estate). The practical difficulties which would be likely to arise if solicitors were held to owe duties directly to beneficiaries under earlier wills provide powerful support for the view that it would not be appropriate to provide a remedy in circumstances in which it is not needed.

    For present purposes the significance of this case lies in the fact that the Court of Appeal accepted that in a case where a solicitor's negligence in regard to the preparation or execution of a will was the cause of expensive probate proceedings after the testator's death, this could give rise to a claim for damages against the solicitors at the suit of the testator's personal representatives for the benefit of the estate generally. On the particular facts of that case, the testator's personal representatives would have had a good cause of action for the loss suffered and, if they had pursued this claim, the solicitor would have been exposed to no double liability.

    THE CLAIMANT'S CASE

  25. The argument presented to Eady J on behalf of the claimant by Mr. Onions QC and the reasons which led Eady J to accept that argument sufficiently appear from paragraphs 20 to 38 of his judgment: ([2000] Lloyds Rep. PN at pp. 808 to 812). I hope and believe that I will do no injustice to the submissions presented by Mr. Onions to this court in support of the judgment, if I summarise their essential features as follows.

  26. Unlike White v Jones and the Carr-Glynn case, this is not a case in which the Court is required to fashion a remedy as a result of a lacuna in the law. There is no lacuna here. It is not contended that the claimant has a personal cause of action arising from a duty of care owed to him as a residuary legatee under the February will. He sues as the Testatrix's sole personal representative. The purpose of the defendants' retainer in September 1989 was to procure a legally effective will for her to execute in accordance with her latest testamentary intentions. The defendants' admitted negligence in carrying out the terms of their retainer involved a breach of their duty to the Testatrix and in the event caused loss to her estate by exposing it to an expensive probate action, the costs of which were in the event ordered to be paid out of the estate in accordance with the Court's usual practice. Her cause of action for the breach of the duty owed to her vested in her personal representative and he can enforce it, no less than the personal representatives could have enforced their cause of action in Worby v Rosser.

  27. The submissions made on behalf of the claimant continue on the following lines. The fact that the defendant solicitors have made a voluntary payment to the Disappointed Beneficiaries by way of settlement of their claims is irrelevant in the present case, and cannot have absolved them from their duty to the Testatrix, in respect of which the cause of action is now vested in her personal representative. Even if the Disappointed Beneficiaries have been compensated, the Testatrix's assets have nonetheless been diminished by the costs of the Will action. To compel the defendants to reimburse the claimant for the costs of the Will action would not impose double liability on the defendants, since they would be compensating not for the same loss but for a separate and quite distinct type of loss. The payment to the Disappointed Beneficiaries was a collateral payment which did not even purport to compensate them for the costs of the Will action. This was not a loss which they had incurred because, in view of the invalidity of the September will, they had no interest in the estate out of which the costs were being paid. The payment to the Disappointed Beneficiaries was made because, in the event, the defendants' breach of duty had deprived them of their interests as intended residuary beneficiaries under the September will. Even though they had been compensated, the Testatrix's assets, as a result of the defendants' breach of duty to the Testatrix, had been reduced by the amount of the wasted costs of the Will action. The defendants had an obligation to the Testatrix to ensure that that kind of loss was not incurred and would not cause a diminution in the estate. There is no occasion for here for the Court to impose "complementary" duties, as there was in the Carr-Glynn case. The crucial question, it is submitted, is: has the Testatrix's estate been compensated for the relevant loss caused by the defendants' breach of duty to the Testatrix, that is to say for the costs of the Will action? The answer, it is submitted, must be No and the claimant must accordingly be entitled to succeed in these proceedings.

    THE DEFENDANT'S CASE

  28. These submissions, which were ably and forcefully presented by Mr. Onions, at first sight have considerable logical force. Before explaining why I find myself unable to accept them, I mention three points which I believe to be common ground on this appeal.

    • First, the retainer is the basis of the duties which a solicitor owes to his client. And "the extent of his duties depends on the terms and limits of that retainer and any duty of care to be implied must be related to what he is instructed to do": (see Midland Bank v Hett, Stubbs & Kemp [1979] Ch 384 at p. 402 per Oliver J).

    • Secondly, on the facts of the present case, as the Judge put it, "the purpose of the retainer was to procure a legally effective will for Miss Tresawna to execute in accordance with her latest testamentary intentions and thus to give effect to those intentions".

    • Thirdly, while the defendants' duty of care was owed to the Testatrix herself and to the intended beneficiaries under the September will, it was not owed either to her personal representatives or to the residuary beneficiaries named in the February will. Indeed the imposition of any such duty would have imposed on the defendants an unacceptable conflict of interest.

  29. However, with all respect to the Judge's judgment and to the claimant's argument, neither of them in my judgment, in considering the duty owed by the defendants to the Testatrix, gave sufficient consideration to the question whether the alleged duty was a duty in respect of the kind of loss which in the event was suffered. And this was the main thrust of the argument presented by Mr. Guy Mansfield QC on behalf of the defendants.

  30. As Lord Hoffmann said in his judgment in Banque Bruxelles Lambert SA v Eagle Star (supra at pp. 211G to 212B):

    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. 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.

    All their Lordships agreed with Lord Hoffmann's judgment. Though these observations were made in a case which concerned the duty owed by a valuer, I see no reason why any different principles should apply in the case of solicitors. However, as Carnwath J observed in British Racing Drivers Club Ltd v Hextall Erskine & Co [1996] 3 All ER 667 at p. 681:

    It needs of course to be borne in mind that, in cases of solicitor's negligence, it is unlikely that the conduct of the solicitor will itself be the direct cause of the damage which is suffered. More usually the basis of the claim is the solicitor's failure to protect the client against some other effective cause. The question, therefore, is whether the particular loss was within the reasonable scope of the dangers against which it was the solicitor's duty to provide protection.

  31. Accordingly, in the present case, it is necessary to determine the scope of the duty of care owed by the defendants to the Testatrix by reference to the kind of damage from which they had to take care to keep her harmless, having regard to the terms of their retainer. Having such regard, I think it clear that this kind of damage was the loss which those who would become interested in her estate, whether as beneficiaries under the September will or as creditors, would suffer if effect were not given to her latest testamentary intentions. It was not the loss which the various classes of beneficiaries named in the February will would suffer in that event, because the Testatrix had no wish or intention that the February will should have any effect after she had signed the September will and the two deeds of gift had been perfected.

  32. The duties owed by the defendants (in contract) to the Testatrix and (in tort) to the beneficiaries named in the September will were not inconsistent, but complementary. In the light of the Carr-Glynn decision, the defendants were under an indisputable liability to compensate the residuary beneficiaries under the September will for the full amount of the residuary estate, undiminished by the costs of the Will action, and they were in my judgment right in doing so. However, following what (as explained above) I understand to be the rationale of that decision, I think that the defendants could not at the same time be under a liability to the Testatrix's personal representative in respect of these same costs. It is true that in Carr-Glynn the damages recovered by the disappointed beneficiaries represented precisely the same sum as that which the testator's personal representatives would have sought to recover if they had chosen to sue the solicitors - namely the value of the lost half share of the relevant property. If one looks at the present case as a matter of strict analysis, I agree with Mr. Onions that the damages which the claimant now seeks to recover do not represent precisely the same sum as that which formed part of the award to the Disappointed Beneficiaries. The former represents an actual sum which, as a result of the defendants' negligence, is not included in the Testatrix's net estate, falling to be dealt with under the February will. The latter was a notional sum which, but for the defendants' negligence, would have been included in the Testatrix's net estate, falling to be dealt with under the September will. In substance, however, the two sums represent the same monetary loss. In my judgment this is the relevant point for present purposes.

  33. The matter may be tested in this way. In the Carr-Glynn case Chadwick LJ suggested (at page 338) that it would have been appropriate (though not essential) for both the personal representatives and the specific legatee to be parties to an action brought by either against the solicitors. In the present case, if a successful application had been made for the present claimant's action and the Disappointed Beneficiaries' action to be consolidated, the court, when the case came to trial, would in the light of the Carr-Glynn decision presumably have regarded itself as bound to award the Disappointed Beneficiaries damages equal in amount to the net residuary estate of the Testatrix, undiminished by the costs of the Will action. I cannot, however, believe that the court would have proceeded in addition to award the claimant a sum of damages equal to the costs of the Will action. To have done so would in substance have involved the double liability and double recovery which the Court of Appeal, in affording the remedy for the assistance of the disappointed beneficiary in the Carr-Glynn case, was so explicitly determined to avoid. And the money recovered would have gone into the pockets of persons whom the Testatrix did not intend to benefit as her residuary legatees.

  34. In the events which have happened, if there proves to be a residue for distribution, the two residuary beneficiaries under the February will (Mrs. Arthur and the claimant himself) will be better off than they would have been if there had been no breach of duty on the part of the defendants, because they would have received no part of the residuary estate if the September will had been effective. In reaching my conclusions, I am fortified by the consideration that if there proves to be a residue, justice scarcely demands that these benefits, unintended by the Testatrix, to whom alone the defendants owed the duty of care now invoked by the claimant, should be received by the claimant at the expense of the defendants.

    CONCLUSIONS

  35. For the reasons set out above the judge's order cannot stand, although I have great sympathy for him, because I have not found it an easy case. I would therefore allow this appeal. I would answer questions 1(a) and (b) submitted to the Judge in the negative. On the information before us, it appears that question (2) does not arise, but I would give the parties liberty to apply on appropriate evidence, should it become relevant.

    Lord Justice Longmore

  36. I agree.

    Lord Justice Brooke

  37. I also agree.


Cases

White v Jones [1995] 2 A.C. 207; Otter v Church Adams Tatham & Co [1953] Ch 280; Ross v Caunters (a firm) [1980] Ch 297; Carr-Glynn v Frearsons [1999] Ch 326; Worby v Rosser [1999] Lloyds Rep. PN 814; Midland Bank v Hett, Stubbs and Kemp [1979] Ch 384; British Racing Drivers Club Limited v Hextall Erskine & Co [1996] 3 All ER 667

Representations

Guy Mansfield QC & Daniel Hochberg for the Appellant (instructed by Reynolds Porter Chamberlain)
Jeffrey Onions QC for the Respondent (instructed by Russell Jones & Walker)


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