Summary

A limited liability partnership that had suffered loss as a result of a valuation company's alleged negligent advice on a property's value was allowed to provide draft amended particulars of claim to include a claim for the actual net loss that it had suffered. Although there was no diminution in value claim, it was arguable that there would be more information at trial to show that there were special circumstances within the meaning of Hadley v Baxendale such that the normal diminution in value rule did not apply to the partnership's claim for damages.

Facts

The applicant property valuation company (C) applied to strike out a paragraph of the particulars of claim filed by the respondents (M), or alternatively for summary judgment against them.

M's business involved buying properties at prices significantly below their market value and selling them on quickly at a profit. C had undertaken a valuation of a property and valued it at £310,000. M bought the property at £210,000. A subsequent expert report indicated that the true value of the property was £210,000. M sold the property three years later at a price of £242,500. M brought proceedings against C and asserted in their particulars of claim that C was aware of their business model, and in particular that they would only buy properties that had a true market value of £275,000 or more. M acknowledged that the £210,000 that it had paid for the property was its actual value at the time of purchase and so did not claim for the diminution in value of the property, but sought various other heads of damage, including loss of profit of £65,000 which represented the difference between the true value of the property at the time of the purchase and the lowest open market value at which M would have proceeded with the purchase if they had been properly advised by C. M did not claim for the actual net loss it had suffered since selling the property, £44,490, as their pleadings assumed that the property had not been sold on.

C sought to strike out the paragraph of M's particulars of claim that detailed the particulars of their losses, including the £65,000 claim for loss of profit, on the basis that the losses were unrecoverable as the true position was that M had bought a property worth £210,000 for £210,000 and therefore had suffered no loss under the applicable diminution in value rule. M argued that it would not have bought the property at all if it was not for C's negligent advice, and it would have purchased another property from which it would have expected to make £65,000 in profit. They also submitted that the nature of their business, which was known to C, constituted special circumstances within the second limb of Hadley v Baxendale and so the diminution in value rule was not applicable.

Held

Whilst there was force in C's argument that M's claim for £65,000 in loss of profit was similar to a claim for damages for a breach of warranty and therefore had nothing to do with the second limb of Hadley v Baxendale, the court had to bear in mind the fact that now that the property had been sold on, M could potentially advance a claim for the actual net loss that they had sustained from buying the property. It was possible that when more facts were known about what C knew of M's business, it could be said that the circumstances of the case fell within the second limb of Hadley v Baxendale. The court was far from persuaded that that would be the case at trial, but it decided that the appropriate course was to give M the opportunity to provide draft amended particulars of claim including a claim for the actual net loss suffered. As to the other heads of damage , the court struck them out as they were either expenses which would have been incurred irrespective of C's alleged negligence, or because the sums claims had nothing to do with C's alleged negligence.

Application granted in part