Doran v. Delaney (No.2)

Factual and Procedural Background

This action arises from a purchase by the Plaintiffs of a site intended for a dwellinghouse, where the Plaintiffs were unable to build due to a defective title affecting part of the property. The First named Defendant was the Plaintiffs' Solicitor in the purchase, the Second and Third named Defendants were the vendors, and the Fourth and Fifth named Defendants were the vendors' Solicitors.

The case was heard before Hamilton P. in October 1993 and resumed in October 1994, with liability determined first and damages to be assessed later. The Chief Justice found the First named Defendant and the vendors liable for breach of duty of care and negligent misrepresentation, while absolving the vendors' Solicitors of liability. The Plaintiffs appealed the finding of no liability against the vendors' Solicitors; the appeal was allowed by the Supreme Court.

Background facts include the vendors having obtained planning permission for a house, but a dispute with an adjoining owner over encroachment caused building to cease. A map accompanying the planning application wrongly included an area of land belonging to the adjoining owner, which was vital for builders' access. This dispute was not disclosed to the Plaintiffs, who were shown a map by the selling agents representing the boundaries as correct. The Plaintiffs' Solicitor advised that staking out the boundary was unnecessary and agreed to deletion of a contract clause requiring an ordnance survey map without informing the Plaintiffs. The contract was entered into for £25,000.

The vendors' Solicitors replied to requisitions on title stating there was no dispute or litigation relating to the property, despite knowledge of the adjoining owner's claim and an alleged settlement without enquiry into its terms. After completion, the Plaintiffs began building but were stopped by the adjoining owner's Solicitors due to encroachment, leading to the Plaintiffs reselling the property at a loss and incurring debts to builders.

The Plaintiffs claimed damages exceeding £232,000 plus general damages, including loss of family home, expenses incidental to purchase and sale, builder's debt, loss of earnings (later abandoned), loss of tax relief, reinstatement expenses, medical expenses, and miscellaneous expenses.

Legal Issues Presented

1. Whether the Defendants owed a duty of care to the Plaintiffs regarding the title and boundaries of the property sold.
2. Whether the Defendants breached their duty of care and/or made negligent misrepresentations to the Plaintiffs.
3. The appropriate measure of damages recoverable by the Plaintiffs for the breaches found.
4. Whether the Plaintiffs' impecuniosity could be taken into account in assessing damages.
5. The apportionment of liability among the Defendants.

Arguments of the Parties

Defendants' Arguments

• The Fourth and Fifth named Defendants' Counsel argued for the application of the measure of damages from Taylor -v- Ryan, which limits damages to the difference between the market value of the property at purchase and the price paid.
• It was contended that the damages should reflect only the immediate financial loss and exclude losses arising from the Plaintiffs' inability to mitigate due to impecuniosity.

Plaintiffs' Arguments

• The Plaintiffs argued for a broader measure of damages that included foreseeable consequential losses such as debts to builders and solicitors, costs of abortive sale, expenses of obtaining alternative accommodation, and reinstatement expenses.
• They contended that their impecuniosity was foreseeable and should be taken into account in assessing damages, as it affected their ability to mitigate losses.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Taylor -v- Ryan (unreported, 1983)	Measure of damages in negligence and breach of contract for purchase of property: difference between market value and price paid.	The Court considered this measure but found it inadequate in the present case as it would cause injustice by excluding foreseeable consequential losses.
Ford -v- White & Co. (1964) 2 All E.R. 755	Measure of damages for purchase of property in excess of market value due to wrong advice.	Adopted as prima facie measure but qualified by the Court based on the facts of the present case.
Liesbosch Dredger (Owners) -v- Edison S.S. (Owners) 1933 AC 449	Impecuniosity generally cannot be taken into account in assessing damages as it is a separate cause from the tort.	The Court recognized this authority but noted subsequent derogations and limited its application to its facts.
Mohammed Issa el Sheikh Ahmad -v- Ali 1947 AC 414	Permitted taking impecuniosity into account where it was not a separate cause but linked to the defendant's breach.	The Court relied on this case to support considering impecuniosity as part of foreseeable loss.
Monarch Steamship Company Limited -v- Karlshamns Oljefabriker (A/B) 1949 AC 196	Remoteness of damage is a question of fact; no universal formula for damages; damages must aim for restitutio in integrum.	Cited to emphasize the complexity of assessing damages and the need to consider foreseeability and mitigation.
Dodd Properties (Kent) -v- Canterbury City Council [1980] 1 WLR 433	Modern approach allowing consideration of impecuniosity in damages assessment.	Supported the view that impecuniosity can be relevant where foreseeable.
Perry -v- Sidney Phillips & Son [1982] 3 All E.R. 702	Impecuniosity may be considered if it is reasonably foreseeable that plaintiff cannot mitigate loss promptly.	Quoted to show attenuation of the strict rule in Liesbosch and to justify considering impecuniosity.
Quinn -v- Quality Homes Ltd. [1976-77] I.L.R.M. 314	Impecuniosity considered in damages assessment.	Used to support the Court's approach to damages including impecuniosity.
Riordan's Travel -v- Acres [1979 I.L.R.M. 1]	Criticism of Liesbosch and support for considering impecuniosity.	Supported the Court's reasoning on damages assessment.
Roche -v- Peilow (unreported, 1986)	Consideration of general damages for anxiety and upset caused by negligence.	Used as guidance in awarding general damages of £10,000 jointly against all Defendants.

Court's Reasoning and Analysis

The Court began by establishing the basis of liability for each Defendant. The vendors owed a duty to disclose the adjoining owner's claim and breached this duty by failing to inform the Plaintiffs and by making negligent misrepresentations in replies to requisitions on title. The vendors' representations regarding the property boundaries and absence of disputes were false and relied upon by the Plaintiffs.

The Court considered the measure of damages, acknowledging the theoretical distinction between contract and tort damages but concluding that in this case, the practical effect was the same. The Court rejected the narrower damages measure from Taylor -v- Ryan as unjust here because it failed to capture the full extent of foreseeable losses, including debts incurred and inability to build.

The Court examined the issue of impecuniosity and its impact on damages. While the traditional rule from Liesbosch excluded losses due to impecuniosity, the Court recognized subsequent authorities that allow its consideration where such losses are reasonably foreseeable and linked to the Defendant's breach. The Court found that the Plaintiffs' impecuniosity and resulting losses were foreseeable and thus recoverable.

The Court held that the First named Defendant (Plaintiffs' Solicitor) breached his duty by failing to ensure the contract contained a clear boundary condition and access provision, which would have prevented the sale or allowed rescission before completion.

The Court rejected arguments for differentiating the measure of damages among the Defendants, holding that the vendors' Solicitors also breached their duty by inadequately responding to requisitions without proper enquiry, thus misleading the Plaintiffs.

In quantifying damages, the Court allowed special damages including the loss on resale, builder's debt (reduced to a reasonable sum), expenses incidental to purchase and sale, reinstatement costs, medical and miscellaneous expenses, while disallowing loss of earnings and loss of tax relief as too remote. General damages for anxiety and upset were awarded jointly against all Defendants.

The total damages awarded amounted to £202,198.56. The Court noted that apportionment of liability for indemnity and contribution claims would be addressed subsequently, with the Chief Justice having already determined that the First named Defendant is entitled to indemnity from the vendors.

Holding and Implications

The Court held that all Defendants, including the vendors' Solicitors, were liable to the Plaintiffs for breach of duty of care and negligent misrepresentation. The Plaintiffs were awarded damages totaling £202,198.56, comprising special and general damages for losses flowing from the defective title and misrepresentations.

The decision affirms that solicitors acting for vendors owe a duty of care to purchasers when replying to requisitions on title and must make proper enquiries to avoid misleading the purchaser. It also clarifies that damages may include foreseeable consequential losses arising from impecuniosity where such losses are within the reasonable contemplation of the parties. The Court emphasized practical justice over strict adherence to traditional measures of damages.

The ruling directly affects the parties by requiring compensation to the Plaintiffs for their losses but does not establish new legal precedent beyond the application and clarification of existing principles regarding duty of care, negligent misrepresentation, and the assessment of damages including the consideration of impecuniosity.