Law firm ordered to pay £1m for registration error

Pelling: Original ruling overturned

The High Court has ordered a defunct Manchester law firm which failed to register a restriction against a house at the Land Registry to pay over £985,000 in damages for professional negligence.

His Honour Judge Pelling QC assessed damages in the case brought against former firm Halliwell Landau after Christopher Hugh Gosden and Jane Shirley Kaye successfully appealed against his earlier ruling awarding them nothing.

HHJ Pelling said the restriction should have been registered to protect the interests of the claimants in the house owned by Mr Gosden’s mother, Dr Jean Mary Weddell.

The judge said that, under an estate protection scheme, it had been agreed that after Dr Weddell’s death the house would pass either to Mr Gosden or a class of intended beneficiaries including the couple and their children, with substantially less tax being paid than if the property passed under a will.

The house remained registered in Dr Weddell’s name, but was made subject to a trust in which the claimants and Dr Weddell were the trustees.

Without the knowledge or consent of the claimants, Dr Weddell sold the house in 2010 for £875,000.

HHJ Pelling said it was common ground that, but for the failure to register, the scheme would have been effective and the property passed to Mr Gosden on his mother’s death in 2013.

The particulars of claim in 2017 put the market value at £1.25m and the claimants said it had since risen further.

In his original ruling in 2019, he held that Halliwell Landau and partner Philip Laidlow had been negligent, but the claimants had not established that this had caused them any loss because, if they had been approached by Dr Weddell for consent to the sale, they would have given it.

However, the Court of Appeal overturned this conclusion last year and ruled that causation and damages were to be approached on the basis that, if the restriction had been registered, no sale would have taken place.

The court remitted the case to him to assess damages.

Delivering judgment in Gosden and another v Halliwell Landau and another [2021] EWHC 159 (Comm), HHJ Pelling said the value of the property should be assessed at the date of Dr Weddell’s death and not the date of the single joint experts’ report, as the claimants contended.

He said it was “immaterial” when the claimant first knew that the property had been lost.

Although knowledge could be relevant to deciding whether and if so what later date should be adopted in some cases, here the loss “crystallised on the date the deceased died, not on a later date when the claimants discovered that the property had been sold or when they commenced proceedings or the date when a single joint expert delivered his or her report”.

HHJ Pelling described these later events as “matters of happenstance” which “provide an entirely arbitrary basis for identifying the date when damages should be assessed”.

The judge said that interest was payable on the damages from the date of death to the date of judgment at 3.5% above the base rate. He rejected the claimants’ argument that a higher rate should be applied.

But he found the estate would have been sold to pay the inheritance tax due and deducted the £125,000 in tax he calculated would have been payable.

HHJ Pelling awarded the claimants damages of £985,300.

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