Court of Appeal judgment on damages principles

On 23 January 2025, judgment was handed down in Barrowfen Properties Ltd v Patel and others [2025] EWCA Civ 39, in which Adam Kramer KC, and Tim Matthewson of Wilbeforce Chambers, instructed by Stephen Ross and Ruzin Dagli of Withers, acted for Barrowfen Properties Ltd.

The appeals followed judgment in favour of Barrowfen at trial, following a family dispute over control of a commercial property in Tooting that was to be developed and held by the family company as a long-term income-producing asset. At trial the first defendant (Mr Patel) were found to have acted in dishonest breach of his director’s duties to the claimant, and the second defendant solicitors were found to have acted negligently.

The result of that wrongdoing was to delay others in Mr Patel’s family getting control of Barrowfen, raising the necessary funding, and causing Barrowfen to proceed with the development scheme on the Tooting property. But for the wrongs, there was a 60% chance that would have happened and the development completed by August 2016, and if not then an 80% chance control would have been gained and the development completed by December 2017. In fact, as a result of the wrongs and the delays they caused in control being gained, the development plan had to be amended and refinanced (the anchor tenant pulled out and building costs went up) and the development did not complete until April 2021.

The main award was of the lost rental income up to April 2021, and certain costs, totalling around £4m.

However, the Judge gave credit against that figure for the increase in the capital value (gross developer’s profit after finance costs to date) as at April 2021 of the amended development, as compared with the original development the claimant would have ended up with but for the wrongs, quantified at £2.5m. Barrowfen appealed, on the basis that this was a notional profit only as the development had not in fact been sold, and would be held indefinitely into the future to produce income, and that the increased finance costs meant that the amended development Barrowfen was left with produced a lower annual profit than the original scheme it would have had but for the wrongs. Moreover, there had been no allegation or finding of failure to mitigate or break in the chain of causation in not selling development in 2021 on completion.

The Court of Appeal, with Snowden LJ giving the lead judgment, dismissed the appeal, on the basis that the decision to retain and not sell the development after 2021 was an independent decision breaking the chain of causation (paras 99-103), and/or the improvements to the scheme were betterment for which credit needed to be given (paras 113-119).

The cross-appeal related to how this £2.5m credit was to be applied. The Judge had applied the credit after the application of the 60% and 32% (80% x 40%) loss of chance percentages, but not the residual 8% possibility. The defendants appealed that decision and contended that the credit should be applied in full and prior to the application of the chances. If necessary, the defendants sought to challenge the logic in the Court of Appeal decision in Hartle v Laceys [1999] Lloyd’s Rep PN 315. The Court of Appeal rejected the cross-appeal on the basis that the credit related to increased development value achieved only in the 60% and 32% worlds, but not the other 8% scenario in which the claimants would not have got control of the property any earlier than they did and so would have ended up with exactly what they ultimately did get (paras 124-5). The Court then went on to explain Hartle v Laceys in some detail.

There was also a minor cross-appeal in relation to costs.

The decision can be found here.

Any applications for permission to appeal are due by 20 February 2025.

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