[98] The case law is summarised at Jackson and Powell on Professional Liability, 7 th Edition, paragraphs 11-220 to 229. Counsel referred to a number of the cases cited therein. I was also referred to my own judgment in Melbourne Mortgages Limited v Carson and McDowell, A Firm [2004] NIQB 82 and to the judgment of Weatherup J in Baird v Hastings [2014] NIQB 77 .
[99] A solicitor in this capacity is acting as an agent of his principal, his client. Bowstead and Reynolds on Agency, 20 th Edition paragraph 6-021 has the following:
[100] The authority of the decision in Bowerman does not seem to me confined to cases of lending. A solicitor who comes into possession of information which is relevant to the transaction in which he is acting and which is of at least potential significance to the client is obliged, generally, to convey that information to his own client. There could be cases where a solicitor has agreed his instructions in such a way with the client as to the limit his role so as to obviate any such duty. But that is not this case. There was no letter of instructions or formal agreement between the plaintiff companies and Mills Selig before the latter firm began to act. In the absence of any such limitation on their role I consider the solicitors bound by a general duty to pass information of potential significance to the client. I consider that the most recent sale at a price three fifths of the price being paid by the client was of potential significance and they should have been informed of it. It was not necessary for Mr McCann to give advice, unless asked to so and agreeing to do so, but the passing of information was part of his general duty as an agent and a solicitor.
[101] It may have been enough for him simply to have sent to all the documents forwarded by Tughans to the client. That would not, I think, be a customary step taken by a solicitor but at least it would have furnished the information to the client. Here they were not made aware of the transaction in that way.
[102] In law that constitutes a breach of the contract between solicitor and client, in this case where the instructions were not otherwise restricted. It only constitutes the tort of negligence i.e. based on a breach of the duty to take reasonable care if damage resulted from what I find to be a breach of duty.
[103] It is therefore essential to go on to consider what would have happened in the hypothetical situation of Mr McCann either sending them a copy of the previous transaction or pointing out the terms of it to them. The hypothesis is not of him then advising the Mallaghans as to what to do because it was essentially a valuation point which, subject to any willing assumption of responsibility by him, was outwith his duty to the client.
Consequences of failure to disclose price of property when sold in December 2015
[104] I begin this aspect of this matter by pointing out that the contract which was sent to the Mallaghans to sign did give some indication of the prior contract but it did not inform them of the significantly lower price. The initial position of the defendant was that even if I find that that was unlawful, as I have done "any loss suffered by the plaintiffs must be confined to the difference in the purchase price and the actual market value of the lands at the time of the first named plaintiff's purchase". They relied on the decision of the House of Lords in South Australia Asset Management Limited v York Montague Limited . [1997] AC 191 . In that case the measure of damages against a negligent valuer was found to be the difference between the negligent valuation and the correct valuation at the time of the transaction, as a general course.
[105] The defendants submitted on that basis the plaintiffs had suffered no loss. Colliers CRE through Mr O'Kane had valued the property at this time for both HSBC and the Bank of Ireland at £1m more than the purchase price. Furthermore Mr Gerard Callan in his report, which was placed in evidence without him being called, was able to point to ten transactions of relevance at a similar price per acreage as the plaintiff here was paying for this land at Seskinore. Thirdly, even the plaintiffs' witness, although he says that at this time he was sceptical of the prices that were being fetched, could not say that £650,000 an acre was not the market valuation at the time.
[106] I therefore conclude that if the matter was simply a matter of a loss arising from the difference between the price paid and the open market valuation at the time of purchase there would be no loss.
[107] However, this is not a valuer's case. It is a case against a solicitor. That makes a difference. I observe, for completeness that what is clear is that the position regarding damages for breach of duty in tort is going to be the same as for breach of duty in contract in this context.
[108] In County Personnel (Employment Agency) Limited v Alan Pulver and Company [1987] 1 WLR 916 Bingham LJ and Sir Nicholas Browne-Wilkinson V.C., with whom Stephen Brown LJ agreed, made it clear that that approach, albeit almost invariable against surveyors "should not be mechanistically applied in circumstances where it may appear inappropriate". The basic principle is as stated by Lord Blackburn in Livingstone v Rawyards Coal Company [1880] 5 Appeal Cases 25 at 39 which Bingham LJ said:
That authority is expressly referred to by Lord Hoffmann in South Australia at page 219E. There is no suggestion that it is bad law.
[109] The plaintiffs pleaded in the Statement of Claim two alternative contentions:
I pause there to mention that it appears that the valuer from Colliers CRE was not aware of the earlier purchase price.
[110] Under the heading of Particulars of Breach of Fiduciary Duties counsel pleaded the following:
[111] The oral evidence of Ronan Mallaghan was to the effect that he would not have gone through with the transaction if he had known of the lower price paid by the vendor Freughmore so recently. His brother Canice said it would not have been his decision but he would have advised his brother to renegotiate. It can be seen that neither of them actually said that they would have taken valuation advice if they had been aware of the matter.
[112] Nevertheless, it seems right to address that issue. If, as pleaded, they had taken valuation advice it seems clear, on the balance of probabilities, that it would have been this was a price which reflected open market value in February 2007. They might by chance have come upon Mr Cassidy as their valuer who might have cautioned them against the purchase, but if they had taken valuation advice the normal duty of the valuer would have been to look at comparable valuations and advise on that basis.
[113] It was suggested that a residual valuation would have been appropriate. Even if that is correct it seems to me from the evidence that I heard that a residual valuation would not necessarily have exposed the excessive optimism of this purchase i.e. that an estate of houses could have been built out allowing one to sell houses at values then being fetched in the neighbouring county town. Whether, of course, one would have found enough buyers is a different matter but that is a judgment for the purchaser rather than for a valuer. I do therefore conclude, partly for that reason and partly because of the approach of the Mallaghans at this time, that even if they had got a further valuation on learning of the £3.3m price in December, which for reasons set out below is by no means inevitable, that valuation would have been consistent with the price they were paying.
[114] There was very limited evidence to deal with the suggestion of Canice Mallaghan that he would have advised his brother to re-negotiate. The only evidence on this was that Mr Horwood was being told that there was another buyer in the market at that time willing to pay more than Freughmore were selling to the plaintiff at. They were being told this by a leading property developer who was a client of theirs as well as of other banks. I could not be satisfied on the balance of probabilities that even if Canice had said that, that would have led to either a reduced price for the plaintiff or them pulling out of the transaction.
[115] The main thrust of the plaintiffs' case is that they would have withdrawn from the transaction if they had known of this, as said by Ronan but not by his brother. The weight of Ronan's assertion on this point as to what he would have done then, in the light of his evidence generally and what has happened since and his strong motives to so assert, is far from compelling.
[116] The defendants urged me to examine that contention closely. They do so without prejudice to their other contention that the proper measure of damages is only the difference between what was paid and the market value at the time; I do find that that difference was nil.
[117] What would the first plaintiff, in effect Ronan Mallaghan, have done if he learnt of the previous transaction of £3.3m? I consider it probable that he would, at least, have asked Mr McWilliams about it. It may well be, no evidence having been called, that Mr McWilliams could have been in the position of holding an option over the lands, granted 6 or 12 or 18 months before at the price in question. That would have been a complete answer to this potential concern. Mr McWilliams would have pressed him, in all probability, threatening him with this other buyer allegedly waiting in the wings.
[118] It may be Mr McWilliams would have told him that even if he had not an option agreement that he had agreed the price 6 or 12 or 18 months before with the Grugans and that, being honest men, they were abiding by the price that they said they would take even though there was no legal contract.
[119] At the very least I conclude Mr McWilliams would have been entitled to point out that the price had been agreed with the Grugans at some stage before the legal transaction in December and that there was a rapidly rising market which Mr Mallaghan had wanted to get into.
[120] What I find wholly improbable is that Mr McWilliams would have spoilt his own sale by saying, in effect, to Ronan Mallaghan that he was paying too much for the land and should not be going through with the transaction.
[121] Given the likelihood that he would have heard one of those three options from Mr McWilliams Ronan might well have thought it wise to get a valuation at that stage. But one has to be careful there. As he admitted to Mr Hanna in cross-examination he had agreed to buy this property in September and was signing for it some six months later without ever having a valuer look at it on his behalf.
[122] In any event as I have set out above if he had got a valuation at that time on a comparable basis he would have been told that this was the open market value of the property or that that value was indeed more as Colliers CRE were telling the Bank of Ireland. Even if, which is improbable, he had got a residual evaluation done by a sceptical and far seeing valuer he might well have still have thought this was an acceptable price to pay. I conclude, on the balance of probabilities that if informed of this price the directors of the first plaintiff, and the second plaintiff the guarantor, might well have reflected but in the light of valuation evidence available and comparables available showing that this was the market value they would have continued with the transaction. It is easy with hindsight to say that that was foolish of them. It is true that in my judgment in Bubble Inns Limited v Beannchor [2008] NI Ch. 2, in January 2007, I cautioned that property markets could go down as well as up but I do not expect the directors of the plaintiff companies here to have read that judgment. Nor am I aware of other cautionary remarks being made at the time of that property boom. It is the case that the plaintiff chose to buy at or immediately before the peak of a market which then stalled and fell back. (See Bonner Properties Limited v McGuran Construction Limited [2008] NICh 16 ; [2009] NICA 49 ; Mooney v Keys and Others [2012] NICh 23 [32]).
[123] I therefore find that the plaintiff fails in these proceedings against the defendant firm, save to the extent that the omission to furnish information about the last sale of the property did constitute a breach of contract. I am not satisfied that the plaintiff has shown that that omission caused any loss to the plaintiff. Nevertheless the plaintiff is entitled to nominal damages for that breach. I will receive submissions from counsel on that topic and on the issue of costs.