THE RIGHT ADVICE
Here's an exam question for you. A mountaineer, about to undertake a difcult climb, is concerned about the state of his knee. He goes to a doctor who negligently makes a supercial examination and pronounces the knee fit. The climber goes on the expedition which he would not have undertaken if the doctor had told him the true health of his knee.
He suffers an injury which is an entirely foreseeable consequence of mountaineering but has nothing to do with his knee. Does he have a claim against his doctor?
This particular example was posed by the law lord, Lord Hoffmann to test causation - the causal link between breach and damage. On one view the doctor was liable for the mountaineer's injury because, had he been given correct advice, he would not have gone climbing and would not have suffered the damage. In Lord Hoffmann's view however, the doctor's bad advice and the injury were unconnected because, even if the doctor's advice had in fact been correct, the climber would still have been injured.
These lofty legal principles were called upon to assist in the more prosaic case of Green v Alexander Johnson (28.6.2005) which involved the quantication of a landlord's losses on an investment property in north London. The claimant trustees owned two adjacent Edwardian buildings with shops at street level and ats above.
The properties were attractive for investment purposes because most of the ats were let on assured shorthold tenancies, leaving the landlord free to manage the block without becoming embroiled in the complexities of service charge recovery. Three ats, however, were let on long leases to a Mrs Tuttle, who applied under the Leasehold Reform Act 1993 to acquire new leases at a premium. The claimants settled these proceedings on advice that turned out to be wrong.
Independently, counter-notices subsequently served by the claimants were invalid. The claimants were obliged to grant new long leases to Mrs Tuttle below market value. This reduced both the claimants' revenue and the investment value of the block as a whole.
When assessing the claimants' losses, the court calculated the difference in investment value between the block with and without the long leases. It then deducted the higher market value, not the actual price, of the leases sold to Mrs Tuttle, and came to a figure of £200,000, which satised neither party. The defendant appealed the calculation of investment value and the claimants cross appealed the allowance made for the value of the leases.
The Court of Appeal upheld the calculation.
It conrmed that the conventional market approach to assessing capital losses was the diminution in value. Any departure from this approach was not necessarily objectionable but should be clearly argued and justied by the evidence. Lord Hoffmann's climber analogy assisted with the allowance for the leases sold to Mrs Tuttle. The claimants would have received a reduced premium for the ats even if the advice they received had in fact been correct.