QBENF 1998/0437/A2 
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE (AT CARDIFF)
QUEEN’S BENCH DIVISION
(THE RECORDER OF CARDIFF)
Royal Courts of Justice
Strand, London WC2A 2LL

Wednesday 12 July 2000

B e f o r e:

LORD JUSTICE THORPE
LORD JUSTICE SEDLEY
and
SIR ANTHONY EVANS

____________

PETER LINGHAM & COMPANY
Appellant
v

KARL LONNKVIST
Respondent
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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040,  Fax No:  0171 831 8838
Official Shorthand Writers to the Court)
____________

MISS LINDSAY BOSWELL QC (instructed by Messrs Hugh James of Cardiff CF1 4QB) appeared on behalf of the appellant.

MR NICHOLAS COOKE QC AND MR MILWYN JARMAN (instructed by Messrs Godfrey Evans & Co of Penarth CF64 2AG) appeared on behalf of the respondent.

____________
Judgment
As Approved by the Court

Crown Copyright ©

1.	Sir Anthony Evans:  We heard this appeal in March 1999.  It is from a judgment given by the Recorder of Cardiff, Judge Michael Gibbon QC, sitting as a High Court judge in February 1998.  He was concerned with a claim by the former owner and vendor of a shop property at 6 High Street, Barry, South Glamorgan, against the purchasers, Mr and Mrs Lonnkvist, and with third party proceedings between them and Peter Lingham Company, a firm of accountants, (whom I shall call Mr Lingham).

2.	The judge tried issues of liability only, that having been ordered by the late Godfrey Evans, District Judge, on 5 December 1996.

3.	The appeal arises in the third party proceedings, where the judge gave judgment in favour of the defendants for damages to be assessed.  He held that the third parties were liable for breach of their contract of retainer, though not in tort (the claim in tort was dismissed).  He also dealt with issues of causation and remoteness of damage which were raised by Miss Boswell QC, leading counsel for the third party.  She submitted in effect that the defendants could not recover substantial, meaning more than nominal, damages.  He rejected this submission.  The issues which gave rise to it were never formally defined nor were they clearly identified.  This was partly because the only breach of contract which the judge held was proved against Mr Lingham was, as Miss Boswell submits, not pleaded or particularised by the defendants as part of the case which Mr Lingham went to court to meet.

4.	We dismissed the appeal against the judge’s findings of breach of contract, for reasons set out in Part I of the judgment of Sedley LJ with which I agree.  This was given to the parties’ representatives in July 1999 as the provisional judgment of the court, but with a request for further submissions on the issues of causation and remoteness which had been little canvassed before us.  We invited the parties to consider whether we should decide these issues on the material we had, or whether there should be further submissions.  In the event, after a regrettably long delay, we reconvened to hear oral submissions on 30 March 2000.

5.	Liability - Breach of Contract:  Miss Boswell then renewed her submission that the breach of contract which the judge held was proved was not pleaded by the defendants, and we once more travelled through what on any view are not precisely drafted allegations.  In the result this proved a useful exercise, because identifying the breach is the first stage in assessing the issues of causation and remoteness which we have to consider and, if it is clear that there cannot be an award of more than nominal damages, decide.  The allegation was:
“(vii)  warned the defendants that the above steps should have been but had not been taken”.
(The steps referred to were those necessary, in effect, to ensure that the figures for turnover up to December 1990 remained valid in July 1991.)

6.	Against this background, the judge’s findings are commendably exact.  He rejected Mr Lingham’s explanation for writing his letter to the bank, the proposed lender, on 17 July 1991, and found that ‘what the bank wanted was a confirmation that the trading activity up to the end of June 1991 was continuing at the level upon which the projections were based, and that Mr Lingham’s letter is not badly drafted, it was what the bank required’ (page 46D).  In other words, ‘Mr Lingham took a risk in writing the letter of 17th July’ (page 46H).  The projections were based on the figures for the year ended December 1990.  The bank understandably wanted to know whether actual trading was consistent with the projected level up to June 1991.  Mr Lingham did not know, but neither did he find out.  He represented to the bank that it was, and that was wrong.  The judge’s finding was that the allegation contained in (vii) of the ‘Further and Better Particulars’ was made out ‘in that the bank’s request required Mr Lingham to take some steps in July 1991 to ensure that the turnover up to the end of June 1991’ supported the projections (for 1991) that had been made.

7.	As to what steps Mr Lingham might have taken, the judge naturally thought that he might have enquired of Mr Cossey, the vendor, who was also his client, and that truthful answers would have been forthcoming (page 47A).  But he did not owe the defendants any contractual duty to consult Mr Cossey, and if he did not do so, then all he could do was to report to them that the bank had made its request for information as to current trading levels and ask for their further instructions so that the bank loan could be secured.

8.	The breach of contract, therefore, was Mr Lingham’s failure to do this, coupled with the fact that he wrote a letter to the bank containing a misrepresentation which the judge found was made negligently and perhaps even recklessly.

9.	These findings are distinct from his earlier rejection of the various explanations for writing the letter which Mr Lingham gave in the course of his evidence in court.

10.	On this reading of the judgment, the finding of breach of contract is clear and the relevant facts were sufficiently pleaded.

11.	Before leaving the question of breach, it is helpful to formulate the contractual term which was broken.  In broad terms, this was Mr Lingham’s duty as the defendants’ agent for the limited purpose of obtaining finance for the proposed purchase, to exercise due skill and care in the performance of that function.  More particularly, it was to respond to the bank’s request for information as to the 1991 trading figures by referring the request to the defendants (or perhaps by approaching Mr Cossey on their behalf) and, on any view of the matter, not to write a misleading reply to the bank.

12.	There was some debate before us as to the practical implications of Mr Lingham’s duty, but Mr Cooke QC referred us to the duty as formulated in the third party defence, in the following terms:
“.... to act for the first defendant for the limited purposes of:
(i) advising him in connection with raising finance for the proposed purchase;
(ii) preparing a business plan to assist in the procedure for raising finance for the proposed purchase; and
(iii) liaising between the plaintiffs and the first defendant in connection with the preparation of the business plan and raising finance for the proposed purchase.”

13.	I would accept Mr Cooke’s submission that this formulation should be accepted for the purposes of this case.

14.	Causation:  Miss Boswell addressed the topic of causation on the basis that the only breach of contract found was writing the letter of 17th July containing the misrepresentation which it did.  She accepted that Mr Lingham could be liable to indemnify the defendants against any claim made against them by the bank for damages for misrepresentation, but no such claim was made.  Therefore, she submitted, no damage attributable to the breach had been suffered.  In fact, the loan was made, and the bank’s later exercise of its right as mortgagee of the property, she contended, was not caused by the misrepresentation.

15.	This submission however does not relate to the finding of breach which the judge in fact made and which this court has upheld.  Mr Lingham failed to refer to the defendants the bank’s request for up-to-date information as to the trading results.  If he had done so, Mr Cossey would have been asked, by the defendants if not by Mr Lingham direct, what the trading figures were to June 1991.  If these were obtained and given to the bank, it is probable that the offer of finance would have been withdrawn or made on different terms.  But that is irrelevant, if the defendants having been alerted to the decline in business would have reconsidered the terms on which they were willing to buy the property.

16.	In my judgment, one consequence of Mr Lingham’s breach of contract was that the defendants were deprived of this opportunity for reconsideration.  There would appear to be, on the evidence before us, at least a real likelihood that the transaction would not have proceeded to the sale of the property.  It cannot be said, in my view, that the chain of causation was broken.

17.	Remoteness:  The test continues to be the natural and direct consequences of the breach of contract, though the distinction between the first (general) and the second (special circumstances) of the two rules in Hadley v Baxendale may have been narrowed by more recent decisions.

18.	Insofar as remoteness depends in this context on a test of reasonable foreseeability, it cannot be said that the defendants’ loss of an opportunity to reconsider their decision to buy the property in the light of the actual trading figures to June 1991, and even their decision to proceed with the transaction without themselves making further enquiries as to the figures, was not a reasonably foreseeable consequence of Mr Lingham’s failure to report the bank’s request for the figures to them, and to advise them that such figures needed to be obtained.

19.	But ‘reasonable foreseeability’ is not the only test.  It is necessary to apply the rule stated by Lord Hoffmann in SAMCO (otherwise known as BBL) [1997] AC 191.  This, as Lord Hobhouse later observed in Platform Home Loans Limited v Oysten Shipways Limited [1997] 2 WLR 518 at 532, is effectively a further requirement analogous with the rule which excludes from the recovery of damages those consequences which are held to be too remote.

20.	The question becomes whether the damages claimed represent the ‘kind of loss’ which it was Mr Lingham’s duty to guard the defendant against.  This test is analogous with the ‘assumption of responsibility’ that is sometimes regarded as one hallmark of the imposition of a duty of care in respect of foreseeable economic loss.  But the test is not necessarily the same, and I would approach the question in the present case by asking whether Mr Lingham as the defendants’ accountant, but with the limited duty of obtaining finance for the proposed purchase, can be held responsible for the consequences for the defendants of failing to inform them that the bank required up-to-date figures which he did not have.  At the very least he deprived them of the opportunity to obtain up-to-date figures, which would have led to them reconsidering their offer to purchase, even though he was not responsible for advising them with regard to the wisdom of the purchase itself.

21.	The judge’s findings on the evidence he heard were these:
“In my judgment it would have been unlikely that the bank would have advanced the money that they did, and in any event unlikely that Mr Lonnkvist would have continued his negotiations for the purchase .... (page 48D)”

22.	Mr Lingham’s admitted duty included advising the defendants as to the obtaining of finance for their proposed purchase.  When the lender whom he approached required further information about the current state of trading, and he did not have it, he should have informed the defendants of their need to obtain it.  In other words, to advise them that they were seeking finance without information which on any view was highly material.  He was under no duty to go further than that.  He could not advise them whether the purchase was wise or not.  But he was bound to advise them that he could not proceed without obtaining the information, and by failing to do this he may be held to have assumed responsibility for the fact that they continued in ignorance of the information and the advice he should have given them.

23.	In my judgment, Mr Lingham may be held liable for the defendants’ losses incurred by proceeding with the purchase.  I express my conclusion in this way because the evidence before the judge was not directed towards these issues, and in my view no final conclusion should be reached before the evidence is given.

24.	Alternative Causes:  Miss Boswell further submitted that the defendants’ losses on the transaction were solely caused by their solicitor’s failure to ensure that they bought the butcher’s shop business as well as the property in which it was carried on and that they had the protection of an anti-competitive clause from the vendors.  The judge rejected this submission, and so would I.  It may well emerge that the solicitors’ alleged failure (we know nothing of the details) was negligent and, as the judge acknowledged, a contributory cause, even a major contributory cause, of the defendants’ losses.  But it is impossible to hold that Mr Lingham’s breach of contract should be excluded altogether.

25.	Conclusion:  As Mr Cooke observed to us, this has proved to be one of those cases where the line of demarcation between liability and assessment of damages is not easy to draw.  This was not apparent when the order was made, but it became troublesome when, at a relatively late stage in the proceedings, issues of causation and remoteness were raised.  These overlap the straightforward distinction between liability and damages but they require separate consideration when the evidence is given.  In fact, the evidence was directed towards the main aspects of the liability issue, not least the defendants’ failed contention that Mr Lingham owed them a duty to advise on the merits of the transaction generally.  It has taken two hearings of the appeal to define the precise issues and to identify what is effectively the single issue which we have to decide, namely, whether there is no prospect of the defendants recovering more than nominal damages for the consequences of the breach of contract.  That is not the present position, in my judgment, on the evidence so far given.  Moreover, that evidence was not specifically directed towards the issues of causation and remoteness which emerged towards the close of the hearing on liability, and in my view there should not be a final ruling until the relevant evidence has been fully heard.

26.	In agreement with the judge, therefore, I would hold that there should be a hearing of the damages issues and  I would dismiss the appeal.  I have anxiously reconsidered the matter after reading the draft judgments of Lord Justices Thorpe and Sedley, but I cannot be as confident as they are that as a matter of law no damages can be recovered by the defendants, given the nature of Mr Lingham’s breach of duty towards them.

27.	Lord Justice Sedley:	This is the appeal of the Third Party, a chartered accountant, against a finding that he was liable to the first-named defendant, Karl Lonnkvist, for breach of his contract of retainer in the negotiation of finance for Mr. Lonnkvist’s purchase of a butcher’s shop and equipment from the plaintiffs, Mr. and Mrs. Cossey.  The action was brought by Mr. and Mrs. Cossey on a promissory note for £15,000 given by Mr. and Mrs. Lonnkvist as part of the consideration for the purchase of the shop.  The defence was, in essence, that the contract of sale had been induced by misrepresentations made by Mr. and Mrs. Cossey, entitling Mr. and Mrs. Lonnkvist to rescission and affording them a defence and counter-claim to the action on the promissory note.  If, however, their defence failed, they laid the blame for their having entered into the bad bargain upon Mr. Lingham, principally and initially on the ground that Mr. Lingham, who was Mr. Cossey’s accountant, had prepared untenably optimistic projections of the profitability of the shop, upon which Mr. Lonnkvist had relied in going ahead with the purchase.

28.	On 5th December 1996 it was ordered that liability on the claim, counter-claim and third party notice should be tried as preliminary issues.  The trial came on initially before Mr. Christopher Pitchford QC at the end of July 1997 but was stood over for particulars to be given by the defendants of their allegations against the third party and for service of reports.  The action was tried over 7 days in December 1997 by His Honour Judge Gibbon QC, The Recorder of Cardiff, sitting as a judge of the Queen’s Bench Division. He found for Mr and Mrs Cossey against Mr and Mrs Lonnkvist, but in favour of the latter against Mr Lingham. For reasons which will become apparent, it has become necessary on this appeal to consider whether, if the finding of liability against the third party stands, there is in law any recoverable damage. 

29.	Liability:  Before turning to the grounds upon which the Recorder found against the third party in his judgment of 20th March 1998, it is convenient to trace the factual history in a little detail, deriving it where relevant from the facts which the Recorder found.

30.	Mr. and Mrs. Cossey ran a butchers shop in High Street, Barry, Glamorgan, which in October 1991 they sold to Mr. Lonnkvist for £95,000 together with its equipment  but (as it turned out) without any transfer of goodwill or reciprocal restrictive covenant.  Because Mr. Lonnkvist was unable to raise the last £15,000 in time for the exchange of contracts, Mr. and Mrs. Cossey agreed to take a promissory note for it.  The two men intended that the business as well as the premises and the equipment would constitute the consideration for the £95,000, although the contract, as drawn, failed to convey it.  At an early meeting on the 5th November 1990 Mr. Cossey truthfully represented the takings as roughly between £3,400 and £4,000 a week, although they might go significantly above or below this bracket.  At this early stage Mr. Lingham was acting as Mr. Cossey’s adviser alone.  Although his turnover figures were misleading in individual respects, they showed something over £183,000 as the projected turnover for the whole of 1990, a figure which turned out to be about right and which had not been orally exaggerated by Mr. Lingham.  In consequence, the business plan prepared by Mr. Lingham, sent to Mr. Lonnkvist and acted on by him, was based on authentic figures.  Last, and most importantly for present purposes, the Recorder found:
“... Between the submission of the first business plan in probably December 1990 and the signing of the contract by Mr. Lonnkvist on 27th September 1991, takings in the shop dropped significantly from 1990 levels, in all by just over 10%.  Mr. Cossey had originally stated that the weekly takings were in the bracket of £3,500 to £4,000, and I have found that that was not a misrepresentation because the takings did come within that bracket, but the significant drop of 10% took the 1991 takings below Mr. Cossey’s original bracketed figures.  It is submitted therefore that that representation made by Mr. Cossey as to the 1990 turnover was a continuing representation, and imposed the duty on Mr. Cossey to inform Mr. Lonnkvist of any change of circumstances which made that representation (which was true at the time) false.  I do not accept this proposition of law.  Any representation Mr. Cossey made as to the shop’s 1990 turnover in 1990 related to the specific period to which it referred ...”

31.	He went on to reject Mr. Lonnkvist’s case that Mr. Cossey had asserted to him on several occasions during 1991 that the business was continuing to trade at the 1990 level.  Among other things the Recorder found:
“Mr. Cossey did not appear to me to be a person who would deliberately lie if in 1991 he had been asked directly whether takings had continued at the same level as they had been in 1991.”

32.	The Recorder rejected the defence that payment of the promissory note was conditional on the business making profits;  and he rejected the counter-claim, which asserted that Mr. Cossey, directly and through Mr. Lingham as his accountant, had caused Mr. Lonnkvist loss by inducing him to purchase the shop by means of false representations about its turnover.

33.	Mr. Lingham’s role, touched on in the main action, is brought to the fore by third party proceedings.  The initial meeting on the 5th November 1990 had involved Mr. Lingham purely as Mr. Cossey’s accountant.  Mr. Lonnkvist at that stage asked Mr. Lingham to act for him as adviser on the proposed purchase.  Mr. Lingham told him that he could not do so because, as Mr. Cossey’s accountant, he would face a conflict of interest.  He offered, however, to act for Mr. Lonnkvist purely for the purpose of helping him to find finance for the purchase, an offer which Mr. Lonnkvist took up eight days later.  It is unnecessary to go through the evidence which brought the Recorder firmly to the conclusion that Mr. Lonnkvist was quite wrong both in his evidence of a general retainer and in his assertion that he did not understand Mr. Lingham’s warning that he should seek independent financial advice.

34.	The business plan initially prepared by Mr. Lingham went through three revisions.  Mr. Lingham sent its fourth and final version on 21st June 1991 to Mr. Lonnkvist and also to an investment broker, Steven Howells, who three days later put it to the Royal Bank of Scotland as the basis of the loan which Mr. Lonnkvist need to raise for the purchase of the shop.  The plan begins with the common disclaimer of reliability in relation to projections.  Its fourth section, captioned “Financial Summary”, sets out projections, beginning with takings and concluding with retained profit, for 1992 and 1993 (in each case to the 30th June, although this does not appear from the document).  The 1992 column adopts the 1990 takings figure, while the 1993 column adds a 10% uplift.  Then follows the critical paragraph:
“4.2  The takings levels have been based on the current activity of the High Street operation for the period to the 1st December 1990 with an anticipated rise of 10%.  A further rise of 10% is anticipated in the year to 30th June 1993.”

35.	Although this appears to describe two 10% uplifts on the 1990 figures, when in fact there was only one, nothing turns on this.  As will appear, however, the third party proceedings turn upon the rest of this paragraph.   

36.	On the 5th July 1991 a meeting took place at the Royal Bank of Scotland branch in Barry.  The Bank, the Recorder found, wanted to know what the turnover figure in the business plan represented.  On the 9th July Mr. Lingham wrote to the bank manager giving a little more information about Mr. Lonnkvist’s personal assets.  This, plainly, did not answer the question.  The Bank repeated the request by telephone, with the result that on the 17th July 1991 Mr. Lingham sent a further letter which began:
“Reference our telephone conversation, I can confirm that the turnover figures in the projections have been based on the actual turnover that the High Street operation achieved in the last 12 months.”

37.	The Recorder rejected Mr. Lingham’s account of having followed this letter, which he conceded in cross-examination was “very badly worded”, with a telephone call clarifying its contents:
“I find that what the Bank wanted was confirmation that the trading activity up to the end of June 1991 was continuing at the level upon which the projections were based, and that Mr. Lingham’s letter was not badly drafted, it was what the Bank required.”

38.	The letter was sent only to the Bank:  no copy of it went to Mr. Lonnkvist.  The following morning, 18th July 1991, Mr. Lingham wrote to Mr. Lonnkvist to give him the news that that the Royal Bank of Scotland would be offering him a loan of £50,000 for the purchase of the shop.  On the same day he wrote to Mr. Cossey to give him the same news, beginning:
“... I have spoken personally  to the new manager at the Royal Bank of Scotland in Barry who has informed me that a loan to Karl Lonnkvist has been approved ...”

39.	It was only on the next day, the 19th July, however, that Mr. Lingham’s letter of 17th July 1991 reached the Bank.

40.	The deal went through.  Mr. and Mrs. Lonnkvist mortgaged their home to the Bank;  they signed the promissory note to Mr. and Mrs. Cossey;  and on the 2nd October 1991 they exchanged contracts at the agreed price.  By then, although they did not know it, the takings of the business had fallen by over 10%.  To make things worse, Mr. Cossey set up in competition down the road, no restrictive covenant having been exacted.  Mr. and Mrs. Lonnkvist’s business failed.  

41.	When Mr. Lingham was brought in as third party to Mr. and Mrs. Cossey’s action on the promissory note against Mr. and Mrs. Lonnkvist, it was on the basis that Mr. Lingham owed Mr. Lonnkvist duties both in contract and in tort.  The Recorder rejected the case in tort and it has not been sought to resurrect it in this court.  The particulars of breach of duty common to both causes of action were pleaded thus:
“You ... 
(a)  orally represented to the first named defendant that the turnover of the said business was in the region of £198,000 per annum;
(b)  in four business plans prepared for the first defendant gave projected turnover of between £183,000 and £201,000 per annum;  
(c)  in letters dated the 21st day of June 1991 and 17th day of July 1991 advised the first named defendant that those projections were based on the actual takings of the retail business at High Street; 
(d)  orally advised the first named defendant that the business could easily pay its way;
(e)  failed to advise or ensure that the first named defendant took independent financial advice before completing the said purchase;
(f)  continued to act for both the plaintiff and the first named defendant.”

42.	All but the third of these allegations have gone:  (a), (e) and (f), it is conceded, cannot be sustained on the evidence;  (b) is factual but discloses no error;  and (d) was rejected by the Recorder.  It is on (c) therefore that the third party action has come to depend.  On the face of it, it is unsustainable:  the letter of 21st June 1991 has no bearing at all, and the letter of 17th July 1991 was neither sent nor copied to Mr. Lonnkvist.  But by further and better particulars of (b) and (c) the defendants’ counsel pleaded:
“The third party should have (but did not): - 
........
(vi)  taken steps to ensure that the turnover of the shop throughout 1991 until completion of the purchase supported the representations as to turnover and/or projections previously made.  The business plans were being submitted to lending institutions and copied to the defendant in June and July 1991 purportedly showing current turnover but in fact based on 1990 figures in the cash book.  By July 1991 such figures showed takings of £2,000 to £3,000 per month less than the corresponding months in 1990.  By September this decline had increased to £6,000 per month.  

(vii)  warned the defendant that the above steps should have been but had not been taken.”

43.	Understandably, counsel for Mr. Lingham submitted to the Recorder that the pleaded case was at an end, and that there was no basis upon which any finding of neglect could be made against her client.  But the Recorder held that Mr. Lingham “owed a duty both to the Bank and Mr. Lonnkvist to make proper enquiries before making the assertion contained in the letter” of 17th July.  He found that Mr. Cossey, had he been asked, would probably have given Mr. Lingham a truthful answer about the turnover.   He concluded:
“I therefore find that the allegations contained in (vii) of the further and better particulars ... are partially made out, in that the Bank’s request required the third party, Mr. Lingham, to take some steps in July 1991 to ensure that the 1991 turnover up to the end of June 1991 supported the projections made in the business plan submitted to the Bank.”

44.	This was by no means the end of the case: a major issue of causation and remoteness of loss remained to be determined.  But it is convenient to turn to the attack upon the Recorder’s conclusions mounted by Miss Lindsay Boswell QC in a powerful submission.  She contends, in brief, that neither the pleadings nor the evidence entitled the Recorder to make any such findings against Mr. Lingham.  

45.	A party is of course entitled, especially in a case as complex as this, to proper notice of the case he is required to meet.  It is a perfectly fair criticism of the third party notice that it gave no inkling of the case which eventually succeeded against Mr. Lingham.  But three months before the trial, further and better particulars brought the successful allegations into the frame.  Paragraphs (vi) and (vii) were in truth not elaborations of the third party notice but fresh allegations;  but any application to strike them out would have been met with an application to amend the notice, so that - although there would have been a question of limitation - the third party’s advisers would have risked something in costs by any such application.  Whatever the reason, no application was made.  It was then for the third party to meet the newly pleaded allegation at trial.

46.	Miss Boswell next submits that the allegation was met, and that the Recorder, in holding that it was not, misunderstood or overlooked important elements of the evidence and in one instance drew an inference for which there was no foundation.  What she does not dispute is that it was an implied term of Mr. Lingham’s retainer, limited though it was, that he would answer any relevant questions from the Bank carefully and as accurately as he could.  

47.	It is difficult to be unsympathetic to Miss Boswell’s complaint that the case upon which Mr. Lonnkvist eventually succeeded against her client took her – and  possibly her opponent - unawares.  In preparation for the intended trial before Mr. Pitchford QC, the defendants’ skeleton argument had been predicated squarely upon a duty - in the event rejected by the Recorder - to act for the defendant and advise him in relation to the entire transaction.  It was only by the insertion of the phrase “In any event ...”  in the written submissions that the alleged duty of care to Mr. Lonnkvist was cut free of the alleged wide retainer, founding in turn the claim that Mr. Lingham should have taken steps to ensure that the turnover figures continued to justify the projection.  But it remains the case that the necessary elements of the Recorder’s eventual finding in Mr. Lonnkvist’s favour were discernible in the pleadings, even if they took an unanticipated form and even if the Recorder’s allocation of them to sub-paragraph (vii) rather than (vi) of the particulars is at first surprising.

48.	The Recorder noted that the further and better particulars went “well beyond the allegations” in the third party notice but said:
“No point was taken by Miss Boswell, and she has met these allegations.”

49.	Miss Boswell tells us that she cannot explain how the Recorder obtained the impression that she was not objecting to the uncovenanted breadth of the defendants’ case;  but it was not the breadth but the shape of the defendants’ case that took her by surprise.  The reason for this is to be found in the evidence.  

50.	When Mr. Jarman, then representing Mr. and Mrs. Lonnkvist, cross-examined Mr. Lingham he obtained an admission that the letter of 17th July was “very badly worded”.  A little later Mr. Lingham volunteered this:
“Now, I would suggest that I would have followed that up, when I had the copy on my desk, to Mr. Gordon [the bank manager] by telephone and said ‘Look, this is a badly worded letter, this is a period, is there a problem?’  But I cannot state that that would have been -
Q	Can you recall doing that, Mr. Lingham?
A	Yes, I can.  
Q	You can?
A	I can recall after that actually having a further discussion with Mr. Gordon and the words from Mr. Gordon were at that stage ‘We are going to do it because we need to have a local butcher in Barry, we haven’t got one,’ or words to that effect.
Q	So what was the date of that telephone call?
A	Well, I don’t know.   I can’t be categoric ....”

51.	The Recorder was understandably sceptical of this passage of evidence.  He said of Mr. Lingham:
“I have to hold that he has not been frank to the court, particularly with his evidence that he followed the letter by phoning Mr. Gordon and saying ‘Look this is a badly worded letter.’  The Bank wanted something in writing, if he is right, and the only way to correct a badly worded letter in those circumstances would be by a letter correcting the letter at fault.”

52.	Pausing there, Mr. Lingham had done himself a classic disservice.  He had proceeded from the obvious need of the letter of 17th July 1991 for correction to an assertion that he “would” have corrected it, followed immediately, when prodded by counsel, by an assertion that he had done so by telephone and could recall the conversation, although not its date.  It was an account which was not entirely easy to credit.  

53.	Even so, Miss Boswell submits that the Recorder’s adverse finding overlooks and conflicts with other parts of the evidence.  For example, the Recorder echoed Mr. Jarman’s expressed puzzlement at Mr. Lingham’s evidence that the bank manager wanted more detail about the period to which the turnover figures in the business plan related.  Repeating Mr. Jarman’s comment that the bank already had this in writing in paragraph 4.2 of the business plan, he said:   “I have to say that I don’t understand it either.”  Miss Boswell submits that they were both wrong.   The key paragraph of the business plan showed the turnover to December 1990, but not the length of the period which it covered.  This, she submits,  provides an intelligible reason, but one overlooked by the judge, for the reference to “the last 12 months” in the letter of the 17th July.  Then there was evidence, or at least confirmation, as Miss Boswell points out, in the letter sent by Mr. Lingham to Mr. Cossey on the 18th July that he had indeed had a conversation with the bank manager that morning - something of which the Recorder takes no overt account.  And she criticises the Recorder’s further finding, rejecting Mr. Lingham’s evidence that the bank wanted his firm’s authentication of the business plan on the ground that it would have had Mr. Lingham’s letterhead covering it when it was first submitted, pointing out that it was not Mr. Lingham who had submitted the plan but Steven Howells, the finance broker.  As to the judge’s further ground for disbelieving Mr. Lingham, namely that he was “reluctant to confirm what was requested in writing”, there being no reference to it in the initial letter to the bank of  9th July and a telephone message having been necessary to prompt it, Miss Boswell submits that this is to exchange cause for effect.  I am not persuaded that this is so, but the point is in any event an appendix to the Recorder’s conclusion on this topic.  What matters is the submission that there was no sufficient evidence to support the Recorder’s finding that the bank wanted confirmation that the trading figures were valid to June 1991.   As to this, Mr. Lingham’s letter of 17th July, confused and confusing though it is, itself furnishes a sound basis for the Recorder’s inference that such a request had been made, and not simply a request to confirm the length of the period to December 1990 represented by the figures in the plan.  

54.	Seen as a response to this request, the letter was at best obscure and at worst misleading.  Paragraph 4.2 of the business plan, it will be recalled, said:
“The takings levels have been based on the current activity of the High Street operation for the period to the 1st December 1990 ...”

55.	The letter of 17th July 1991 started:
“... I can confirm that the turnover figures in the projections have been based on the actual turnover that the High Street operation achieved in the last 12 months.”

56.	Carefully read, the letter makes no sense.  The use of “have been” and “last 12 months” would by themselves suggest up-to-date figures.  But the reference to “the turnover figures in the projections” takes the reader back to December 1990.  If the letter had referred to “the previous 12 months” the use of the continuous past tense might have been overlooked, but the use of the continuous past tense with “the last 12 months” strongly suggested that the figures were up-to-date.   While, therefore, the Recorder’s finding that the letter was designed to give the impression that the figures were valid to the end of June 1991 is a harsh one, since he could well have concluded that the letter was not capable of meaning anything to a careful reader, Mr. Lingham had forfeited much of his defence to such a finding by his confabulation of evidence (by which I mean not fabrication but the unconsidered filling of gaps) about a follow-up to the letter.

57.	Damage:  Although oral argument before us was principally devoted to the tenability of these findings, it remained - and remains - for Mr. Lonnkvist to show that they constitute a breach of contract which has caused him recoverable loss.  

58.	That there was, on the judge’s findings, a breach of contract is inescapable.  The writing of the letter, even if it was no more than muddled but more so if it was intended to mislead, was a breach of Mr. Lingham’s accepted duty to answer carefully and as accurately as possible any questions from the bank in relation to the proposed finance.  The real issue is whether the breach has caused Mr. Lonnkvist any loss which is not too remote to be recoverable. 

59.	This question was barely canvassed in the first argument of the appeal. It was after judgment had been reserved that it became apparent that although it was an issue which lay on the frontier between the preliminary issue of liability and the contingent question of damage, if no more than nominal damage were recoverable for the breach which has now been established, there would be effectively nothing to send back for trial. For reasons to which I now turn, and in regretful disagreement with Sir Anthony Evans, whose judgment I have seen in draft, I have reached the conclusion that Mr Lonnkvist has on no legally possible view suffered more than nominal damage by Mr Lingham’s breach of contract.

60.	The first and undoubted fact is that the bank agreed the loan before it received the letter.  This has to be related to the Recorder’s first finding on causation:
“What would have been the consequences if Mr. Lingham had enquired of Mr. Cossey about the level of the 1991 takings and had been informed that they were down by approximately 9% from the 1990 takings?  In my judgment, a significant conflict of interest would have then arisen between the interests of Mr. Cossey and those of Mr. Lonnkvist.  The application to the Bank could only have been pursued if they were informed of a drop in takings.  It is probable that the Bank would have required an amended business plan to be submitted.  In those circumstances there would have had to have been a clear duty to inform Mr. Lonnkvist of the change of circumstances.  All this would have required the prior consent of Mr. Cossey, which may or may not have been forthcoming.  
In my judgment it would have been unlikely that the Bank would have advanced the money that they did, and in any event unlikely that Mr. Lonnkvist would have continued his negotiations for the purchase of No. 6 High Street.  He would have been put on his guard against purchasing the premises, at least at the asking price.  Mr. Lingham should have foreseen, when he wrote the letter of 17th July, that it was possible that if he made the enquiries required of him, they would show that the 1990 turnover was not being maintained in 1991.  He should have therefore realised that by writing the letter, it was possible that he was misleading the bank, which in fact he did, and denying Mr. Lonnkvist knowledge of matters which could have had a significant bearing on whether he should have purchased the shop, again which in fact he did. 
..........
The third party’s breach of his contractual duties under the retainer was responsible for Mr. Lonnkvist not knowing the true trading position for the purchasing of the premises which he would not have purchased at the price he did but for the breach.  In those circumstances, the costs incurred in the purchase at least constitute loss.”

61.	The Recorder went on to reject Miss Boswell’s argument on remoteness - namely that the real cause of Mr. Lonnkvist’s loss, if any, was his solicitor’s failure to include and protect the goodwill of the business in the contract of sale - on the ground that this did not exclude the causative effect of Mr. Lingham’s negligence.  On its own, this finding is unexceptionable, at least to the extent that it would leave the question open for future determination. Furthermore, the undoubted fact that the bank agreed the loan before the letter arrived is inconclusive.  If there was a duty to give up-to-date figures, and if these would have shown a drop in takings, then the late arrival of an accurate letter would still have enabled the bank to withdraw or modify its offer and might have induced it to do so.  

62.	The real question therefore is the true ambit of Mr. Lingham’s duty to Mr. Lonnkvist.  It was a duty to use his best professional endeavours to procure the grant by the bank of finance for the purchase of the shop.  An element of the duty was to respond to any reasonable request by the bank for further information.  The obligation to do this accurately was owed by Mr. Lingham not to the bank but to Mr. Lonnkvist.  Had a loan been made on the strength of inaccurate information given to the Bank by Mr. Lingham, it would have been against Mr. Lonnkvist that the bank had its recourse, and Mr. Lonnkvist would have had a remedy over against Mr. Lingham.  But there was no legal nexus between Mr. Lingham and the Bank. 

63.	The loan which Mr. Lingham was retained to seek was made.  It could not have been, nor was it, recalled for misrepresentation, since it had not been so induced.  At most, as I have said, the bank might have gone back on its offer if the letter, when it arrived, had been accurate.  The security, Mr. and Mrs. Lonnkvist’s home, was realised because the business failed.  But the Recorder concluded that had Mr. Lingham done his duty he would have asked Mr. Cossey how the business was doing and have been told of the downturn; he would have warned Mr. Lonnkvist, who would not have gone through with the purchase.

64.	But Mr. Lingham had been extremely careful to limit his own retainer in order to avoid any conflict of interest save that which his two clients, Mr. Cossey and Mr. Lonnkvist, were prepared to accept.  Mr. Cossey had waived the confidentiality of the relevant part of his business accounts in order that a business plan could be prepared for Mr. Lonnkvist and presented to the bank.  But Mr. Lingham had undertaken no responsibility whatever to advise Mr. Lonnkvist.  Whatever might have been the position in tort (and part of the Recorder’s reasoning on causation, quoted above, is in the language of tort liability), the only material duty which Mr. Lingham owed Mr. Lonnkvist in contract - namely to give the bank accurate information - though breached by him, had no consequence adverse to Mr. Lonnkvist, who obtained the loan which he wanted without any subsequent claim on the bank’s part to have been misled into granting it.  Mr. Lingham owed him no contractual duty to advise on the wisdom of the purchase:  as everybody including Mr. Lonnkvist knew, he could not do so consistently with his obligations to Mr. Cossey.  Nor was it his obligation to prevent the bank from making an unwise loan.  That, therefore, proper enquiries and a proper response by Mr. Lingham might have alerted either the bank or Mr. Lonnkvist or both to the fact that the changed situation made the proposed purchase unwise is not only speculative but, more important, something beyond the reach of the contractual relationship existing between Mr. Lingham and Mr. Lonnkvist.  

65.	It is apparent from the skeleton arguments submitted at trial that, to the end, the case for Mr. Lonnkvist stopped at the assertion that Mr. Lingham should have checked the veracity of the figures which he was giving to the bank.  It assumed that if this could be established, liability would follow.  Miss Boswell in her final skeleton argument dealt discretely with causation, but – for reasons which will have become apparent earlier in this judgment  - believed that she was still doing so in response to a case in negligence.  She wrote:
“There are so many gaps in Mr. Lonnkvist’s case on causation that it is difficult to put forward the difficulties in his case in any logical order.”

66.	This issue, whether it is treated as one of causation or one of remoteness, seems to me to turn on the first principles illustrated by the decisions of this court in Galoo Ltd. v. Bright Grahame Murray [1994] 1 WLR 1360 and Swindle v. Harrison [1997] 4 All ER 705. The first confirms that the mere acceptance of a loan cannot amount to a loss causing damage.  It confirms, too, that it is not enough that a breach of contract has given the opportunity for a loss to be sustained:  the breach must be the dominant or effective cause of the loss if it is to sound in damages.  The second case, looking at the same issue from (so to speak) the opposite direction, confirms that loss, if proved, must be shown to have been caused by the defendant’s breach of duty.  Both chime with what Lord Oliver of Aylmerton said of negligence (where recoverable damage is part of the cause of action) in Caparo Industries Plc v. Dickman [1990] 2 AC 605,654:
“To widen the scope of the duty to include loss caused to an individual by reliance on the accounts for a purpose to which they were not supplied and were not intended would be to extend it beyond the limits which are so far deducible from the decisions of this House.”

67.	They chime, too, with the underlying principle reiterated by Lord Hoffmann in the Banque Bruxelles case [1997] AC 191, 211, 213:
“A plaintiff who sues for breach of a duty imposed by the law (whether in contract or tort or under statute) must do more than prove that defendant has failed to comply. He must show that the duty was owed to him and that it was a duty in respect of the kind of loss which he has suffered…. Normally the law limits liability to those consequences which are attributable to that which made the act wrongful.”.

68.	We have been shown no authority which closes this gap in the case for Mr. Lonnkvist.   The only authority relied on by Mr. Jarman on Mr. Lonnkvist’s behalf in his written submission to the Recorder is Downes v. Chappell [1997] 1 WLR 426, a decision on proof of damage in the relatively straightforward case where a plaintiff has been induced by a defendant’s fraudulent misrepresentations to buy a business from the defendant at a gross over-valuation.  It has nothing to do with the present case.

69.	Returning to the Recorder’s summary of his conclusions (quoted above) Mr. Lingham had no contractual duty to apprise Mr. Lonnkvist of the true trading position or to advise him about the wisdom of the purchase.  To attribute Mr. Lonnkvist’s ignorance of the true trading position and his decision to go ahead with the purchase to Mr. Lingham’s breach is either to treat the ambit of the contract as greater than it was or to found upon a causative link between two things which had no contractual nexus, namely the soliciting of finance and the decision to purchase.  These were of course connected for Mr. Lonnkvist, but for Mr. Lingham, as his retainer had always made clear, they were entirely separate.  By holding that Mr. Lingham was liable for failing, in substance, to head off Mr. Lonnkvist’s purchase of the shop, the Recorder has in effect - and in perhaps understandable response to the obliquity of Mr. Lingham’s evidence - reintroduced the very duty of care which he had earlier, and correctly, rejected. The same, in my respectful view, is true of the proposition which has found favour with Sir Anthony Evans that Mr Lingham’s breach of contract deprived Mr and Mrs Lonnkvist of the opportunity for reconsideration of the proposed purchase: Mr Lingham, as he had always made perfectly clear, had no duty to afford them such an opportunity. 

70.	Likewise, the fact that had he gone back to Mr Lonnkvist about the need for up to date figures Mr Lonnkvist might – or, as the Recorder found, might not – have got them from Mr Cossey cannot make Mr Lingham answerable for all the possible consequences (of which renegotiating or reneging on the purchase were only two). Not only would such a conclusion introduce unacceptably remote effects into the computation of loss; it would render Mr Lingham liable for failure to do the very thing Mr Lonnkvist had agreed he should not be required to do, namely to furnish to Mr Lonnkvist information about Mr Cossey’s accounts.

71.	Returning to the Banque Bruxelles formulations, it seems to me that the duty which was broken was a duty to give the bank reliable information about the business; that the loss suffered by Mr and Mrs Lonnkvist was the purchase of premises containing a business which failed; and that to the extent (itself highly contentious) that this was because they did not know of the downturn in takings, this had nothing to do with what made Mr Lingham’s omission wrongful since he owed them no duty to alert them to it.

72.	For these reasons I would allow this appeal.  I do not consider that the theoretical entitlement of Mr. Lonnkvist to nominal damages for the breach which has been found justifies a remission of the case for the assessment of such damages.  I would order that judgment be entered for the third party in the third party proceedings.

73.	Lord Justice Thorpe:  I have had the advantage of reading in draft the judgments of my lords on the issue of causation and remoteness.  I accept the analysis of my lord, Sedley LJ.   I adopt it as well as his full and careful reasoning.  Although the defendant is the victim of contractual breach, and a reprehensible breach at that, we would hardly right the wrong by committing him to yet another round of trial the outcome of which would inevitably be of no solace to him.

Order:  Appeal Allowed.  No order for costs, either in the Court of Appeal or in the court below.  Application for permission to appeal to the House of Lords refused.

(Order does not form part of approved judgment.)