Home Information Cases Malmesbury v Strutt & Parker (2007)

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Malmesbury v Strutt & Parker (2007)

Summary

Chartered surveyors had been negligent in the conduct of negotiations for leases of land for use as airport car parking because they had failed to obtain a turnover rent. The appropriate measure of damages for the lost chance of negotiating a turnover rent was the diminution in value of the reversions assessed as at the transaction date.

Facts

The claimants sought damages against the first defendant firm of chartered surveyors (S) and the second defendant firm of solicitors (W) in connection with alleged negligence in the negotiations of three leases. The first claimant was the tenant for life of an estate under a settlement. The second and third claimants were trustees of the settlement. The estate owned land adjoining an airport and the claimants had employed S to negotiate with the airport owners for the grant of leases to use part of the land for airport car parking. The estate land was green belt land, but planning permissions were obtained for use as car parking. The access road to the airport was owned by the airport. A five-year lease was agreed in 2000 when the airport was looking to expand. A low base rent was agreed on the basis that the airport would make improvements to the car park. Following the grant of planning permission for a new terminal a 24-year lease was agreed in 2002. In 2003 a lease of an additional plot of land was agreed for 23 years. The rent review provision in the leases was tied to the price of car park season tickets charged by the airport. The claimants claimed that S was negligent and in breach of duty in failing to negotiate rents that reflected the earnings of the car parks, that turnover rent should have been obtained that provided for the estate to receive 80 per cent of the profits, and that S had failed to advise them of the possibility of building a car park itself or letting the land to a commercial operator. The claimants submitted that damages for the lost chance of negotiating a turnover rent should be assessed as the difference between the future earnings that would have been obtained and those likely to be actually obtained. S argued that the loss was the diminution in value of the reversions.

Held

The standard of professional skill and care to be expected from S was that to be expected of a major national firm of chartered surveyors. It was the competence to be expected from such a firm holding itself out as having the competence to act in connection with the development of land adjacent to an airport. On the evidence, S had not been negligent in relation to the 2000 lease. S had suggested a turnover rent but the airport owners had refused in strong and clear terms. S had been entitled to conclude at the time that the airport owners were in a stronger bargaining position. S had not suggested a turnover rent in negotiations for the 2002 and 2003 leases, and it had not occurred to S to do so. S had not properly considered what the rent under the 2002 or 2003 leases should be, and what income the car parks were going to produce. S should have realised that the position had changed and that the airport owner's reasons for rejecting a turnover rent were no longer valid. S should have attempted to negotiate a turnover rent, but a figure of 80 per cent of the profits was wholly unrealistic; 20 per cent was more appropriate in the circumstances. S was not in breach of duty in failing to advise the estate that it should set up an independent car park on its own land. The airport owners were able to prevent access from the airport to the estate land and they would have prevented a rival car park from operating. (2) The claimants were entitled to damages on the basis of what S would most likely have obtained in negotiations if he had done no more and no less than was required to fulfil his duty. On the evidence, if S had argued for a turnover rent at a modest level when negotiating the 2002 lease, the chance of the airport owners refusing to agree as a matter of principle was very small. The airport owners would have wanted to avoid having to apply for planning permission to build their own car parks elsewhere on their land. Whilst neither side would have wanted the negotiations to fail, the airport owners were in a stronger position, and would have conceded a percentage turnover of 10 per cent. In a case where the complaint was of negligent advice to a tenant as to rent, damages should be assessed on the basis of the values at transaction date unless there were circumstances particular to the transaction that made it inappropriate, County Personnel (Employment Agency) Ltd v Alan R Pulver & Co (1987) 1 WLR 916 applied. There was no distinction between the grant of a lease and the taking of a lease. Accordingly the correct approach to the assessment of damages in the instant case was the valuation of the reversions, and the value was to be considered at the date of the transactions, unless the circumstances showed that to do so would not accurately reflect the overriding rule as to compensation; that a party should be put in the same position as he would have been if he had not sustained the wrong, Inter-Leisure Ltd v Lamberts (1997) NPC 49 applied. There was no special consideration in this case that meant that a valuation basis should not be applied, and there was no justification for taking dates later than the transaction dates. (3) W had been employed to give legal advice. It fell within S's expertise to know that a turnover rent was appropriate, it was not within W's expertise.

Judgment for claimants

Queen's Bench Division
Jack J
Judgment date
11 May 2007
References

[2007] PNLR 29 : [2007] 21 EG 130 (CS)