HT-2022-000417 - [2025] EWHC 1691 (TCC)

Alternative 2

After the end of the closing oral submissions and after it had been realised that Mr Conti’s start date – the date of the commencement of the remedial works – was wrong given that the remedial works started in July 2019 and not as previously thought by Mr Conti in October 2019 these figures were updated by an email from the Defendant’s counsel which stated:

“As requested at the hearing today, the updated figure provided by Mr Conti for Abbey's loss of profits claim is £644,291.

This has been calculated using the "CONTI - Loss calculations" tab in the Updated Joint Model {D1.4/2}, with the following assumptions and changes from Mr Conti's calculation of the rounded figure of £391,000 given in the accountants' second joint statement{D1.4/1/23}:

• Start date: July 2019 (previously October 2019)

• End date: May 2020 (no change)

• Period of loss: 11 months (previously 8 months)

• Additional residents over period: 7 residents (previously 5)

• Average growth rate over period: 0.636 residents per month (previously 0.625)”

The “but for position” is not agreed but the matters still in dispute are limited. The remaining issues are

-1 The but for start date

This claim is £20,000 plus VAT namely £24,000 in abortive costs paid by the Claimants to WFW in respect of the BlackRock deal. The Claimants seek damages because but for Simply’s breaches of duty those costs and disbursements would not have been aborted and wasted as aborted sums.

Simply had asserted in opening that Claim T4 could not be claimed in addition to Claim T3.

Given Simply’s alleged insolvency and alleged intransigence to date, the Claimants stated in its written closing that it does not wish to generate any delay in enforcement of any judgment, nor any appealable point of law on a lower value head of claim.

On that basis and without concession, the Claimants now seek damages on Claim T4 only in the event that Claim T3 were to be rejected, and thus in the alternative to Claim T3. The Claimants still contend that the costs are plainly abortive and wasted. Any future sale will now require the renewal, instead of the re-use, of such costs and disbursements and the underlying work.

During the course of the trial I indicated that the pursuit of this size of claim could be said to be disproportionate. Despite all this I propose to make an order in respect of this claim.

Claim T4 states that these abortive costs were paid by Toppan. Claim A2 states that these abortive costs were paid by Abbey. Interim and final invoices claiming £6,000 were sent to both Toppan and Abbey. The invoices and their payment in the sums claimed are clearly documented. These losses were caused by Simply’s breaches of duty and these costs were plainly aborted and wasted. Any future sale will require new work. The abortive work cannot be reused.

The claim is for £7,400.39. It is the overdraft charges allegedly incurred by Abbey by reason of Simply’s breaches of duty.

Abbey has alleged it was required to make additional use of its overdraft facility during the remedial works due to static occupancy and loss of increased expected income. Abbey alleged it had to make higher interest payments totalling £7,400.39 than would have been incurred but for the defects and thus Simply’s breaches of duty.

Again I expressed concern that such a claim should be pursued when the sum in dispute is so small and the cost of resolving this claim is disproportionate to the sum in dispute. However, despite all that, I reject this claim because such a loss is far too remote. Simply had no knowledge of how these remedial works were to be funded. Simply notes that the interest is claimed from 15 December 2018 to 13 September 2019 which does not correspond to the timing of the remedial work. I do not consider that Abbey has established on the balance of probabilities that these overdraft charges are the responsibility of Simply. These losses are also too remote to be recoverable.

Simply contends that

Where, as here, there are concurrent duties of care in contract and tort, the contractual remoteness test applies, and this is more restrictive than the reasonable foreseeability test in tort. The familiar remoteness test in Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145,Alderson B, at 354, is:

This test was applied by the House of Lords in Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) [2009] 1 AC 61 (HL) with the result that damages for the late redelivery of a chartered vessel were limited to the difference between the market rate and the charter rate for the overrun period. The loss associated with a lucrative follow-on charter was not recoverable.

As Lord Hoffmann explained the remoteness test can have an exclusionary effect, such that a party may not be liable for foreseeable losses because they are not of the type or kind for which he can be treated as having assumed responsibility. Lord Hope also asked whether the loss was a type for which the party can reasonably be assumed to have assumed responsibility.

Lord Roger adopted a more traditional articulation of the test, whereby the damages recoverable for breach of contract are such as flow naturally in most cases from the breach, whether under ordinary circumstances or from special circumstances due to the knowledge either in the possession of or communicated to the defendants.

Lord Walker expressed agreement with all three opinions. He noted that there may be cases where the loss of unusually profitable contracts or exceptionally large losses could be said to be a "serious possibility", "real danger" or "not unlikely" yet it did not follow that they were within the reasonable contemplation of the parties, such as on the facts of The Achilleas, where the scale of the loss was due to extremely volatile market conditions.

Whether losses due to a fall in the market are recoverable in construction cases are fact-specific.

“73.1.In Earl's Terrace Properties Limited v Nilsson Design Limited [2004] BLR 273 (TCC) a claim was brought against an architect for waterproofing defects identified during construction, which resulted in a delay to completion. Judge Thornton QC rejected the architect's argument that the claimant had to give credit for an increase in the sale price over the period of delay. Any loss due to a fall in the market would have been too remote and outside the scope of the architect's duty; it followed that any increase in the market should not be taken into account, at [99]-[108].

73.2.

In John Grimes Partnership Ltd v Gubbins [2013] BLR 126 (CA) an engineer's delay in the completion of designs resulted in a delay to the project and a claim was brought for the decline in value of the development due to the fall in the market over the period of delay. The Court of Appeal held that the loss due to the fall in the market was not too remote and was recoverable as a result of the engineer's delay.”

The Trial Judge in John Grimes, made detailed findings as to the engineer's knowledge, which was referred to in the Court of Appeal's reasoning. The engineer knew that any delay (on his part) presented a risk that the property market might move considerably, including to the disadvantage of the claimant. Further, he knew exactly what the claimant intended to do and when he intended to start.

This case is noted in Hudson's Building and Engineering Contracts (14th edition, Sweet & Maxwell, 2022), at 7-039, in the context of claims for delay and consequential loss, where it is cited as authority for the proposition that unless the market fluctuation is so severe as to be itself unforeseeable, such losses (resulting from delay) will be recoverable, "so long as the property was constructed for sale". The editors add the following comment:

The illustrations in Hudson's, at 7-039, include an Australian case, at (5), Triden Properties Ltd v Capita Financial Group Ltd (1996) 15 ACLR 12. A claim was brought under a development agreement for losses caused by defective curtain walling. The Judge at first instance, Cole J, found that the discovery of the defects after completion resulted in a buyer pulling out of a sale for $65m. The claimant sought to recover the difference between the proposed sale price and the value of the building at trial, some $14m less. Cole J rejected the claim, and that decision was upheld by the New South Wales Court of Appeal on the grounds that the loss was too remote. It was not in the contemplation of the parties that the building would be sold upon completion; indeed, it was the intention that the claimant would become a long-term tenant of the property.

Simply’s analysis of the present state of the law regarding remoteness is not challenged. What is challenged is their understanding of the factual background to this transaction particularly after the cross examination of their own independent valuation expert Mr Savage.

In the light of that cross examination I find and so hold that.

Contrary to Simply’s submissions the alleged losses associated with the proposed sale to BlackRock did arise naturally according to the usual course of things as a result of Simply’s breaches and the defects. The alleged losses were in the reasonable contemplation of the parties at the time of contract and as stated by Mr Savage Simply and the Claimants had special knowledge regarding the very real likelihood of the sale of newly constructed care homes.

In the light of the evidence I find and so hold that the actual or potential onward commercial disposal of the care home for profit was known to Simply through its directors, Christopher O'Brien and Gary Sharp, and/or was in their reasonable contemplation. Simply had introduced Puma to Toppan, and indeed the package deal. Simply and its directors operated in the same specialist field as Toppan with the knowledge and understanding that:

I find and so hold that the alleged loss is not too remote.

Simply contends that either individually or in combination these matters meant that there was a real risk that BlackRock would not have proceeded with the transactions. I disagree.

With regard to the planning permission issue, the Care Home only had planning permission for 60 bedrooms, rather than the 65 which had been constructed and were being operated. This issue was raised by Gary Phillips, Toppan’s property agent in his email dated the 20^th July 2018 to the seller team when he stated:

“The Home does NOT have a clear planning permission for 65 beds and they will want this regularised and will not complete on the transaction UNLESS there is a further retention of monies as the planning is not 100% guaranteed and they will therefore not pay for a 65 bed Home until it’s approved by the planners.”

Mr Taylor, when cross-examined stated and I accept his evidence on this point.

“I don’t believe it was one of the things that stopped the deal happening.”

In any event Simply in its written closing submissions suggest:

“at the very least BlackRock would have wanted a retention.”

That in itself would have prevented the planning permission issue from blocking the deal.

The VAT clawback issue relates to the risk that Toppan would be liable to pay VAT on the construction cost of the Care Home upon the sale. Toppan sought, and received, specialist VAT advice from McIntyre Hudson following which a 999 year lease, rather than a 125 year lease, was agreed and treatment of VAT was no longer a material concern.

As McIntyre Hudson advised.

“HMRC now accepts that a 999 year lease is tantamount for 70 GC purposes to the transfer of the asset. This follows the outcome of a tribunal case (Robinson Family (TC 02048).”

By the 7^th August 2018, Gary Phillips informed Mr Taylor and Mr Sodhi that BlackRock had downed tools with their lawyers due to the fire resistance issue. However, he went on to urge Toppan to deal with the planning permission issue (emphasis added):

“While you take stock of the above, I would urge you to get the planning sorted out! Has planning been submitted for the additional five beds? This is the only point that BR are concerned with following my call with their Board yesterday.”

Planning, not VAT was the only point that BlackRock was concerned about and the alleged obstacle could be readily removed by adopting a retention in the sale agreement.

On the 30th July 2018 Toppan updated one of its Lenders that terms were agreed with BlackRock, due diligence largely complete, surveys completed, legals very advanced and exchange should occur with early completion in September 2018. There appears to be no evidence BlackRock required or asked for updated financial records.

On the balance of probabilities, but for the defects caused by Simply’s now admitted breaches of duty, Toppan and BlackRock could have proceeded with the deal and the deal would have been completed in or about September 2018.

What was in fact the deal breaker was the defects.

The Claimants allege that but for Simply’s breaches of duty and the defects, Toppan would have completed a sale of the Care Home to BlackRock in or around September 2018 on a sale and leaseback basis of £22.5m. Of that sum, £20.5m would have been paid on completion. The experts almost agree that the retention of £2,000,000 would not have been paid. However, the Claimant accepts in Annex 4 of the Particulars of Claim that:

“The retention of £2,000,000 would not have been achieved.”

The valuation experts agreed that there was no fall in the market until the Liz Truss mini-budget also known as the fiscal event of 23 September 2022, and the impact of that mini-budget was, as Mr Savage notes, unprecedented and any resultant loss would be too remote.

The valuation experts also agree that during the period from June 2018 to September 2022, the investment market for Care Homes was broadly stable, and the net yields adopted by BlackRock were within the range of evidence throughout that period.

As against the Claimant’s pleaded valuation date of 15 September 2022, Mr Lock’s valuation is £19,800,000 (based upon a lower initial rent of £1.05m and the retention of £1.8m would most likely have been met equating to an alleged £0.7m loss).

The valuation experts have considered the market value of the Care Home on a sale and leaseback basis at various points in time. These conclusions can be summarised as follows:

This claim has to some extent been over-analysed. There is a short answer to the question of whether the Claimants have made a loss because of the failure of the BlackRock deal.

As Mr Lock agreed, in a sale and leaseback transaction, the seller and the tenant/operator need to find a balance between the maximum headline price and the affordability of rent.

The rent that Abbey was paying to Toppan under its existing lease was:

The BlackRock Offer was based on initial rental payments of £1.2m per annum, increasing annually in line with the Retail Price Index, so:

On the basis of completion in September 2018 and Toppan paying the difference in rent for the first two years, this would have resulted in payments of:

If as I find and so held, Toppan would have had to pay to Abbey the difference in rent for the first two years of the BlackRock deal Toppan has not suffered any loss through the collapse of the BlackRock deal because of the defects.

On the Claimants’ pleaded valuation date of September 2022 and on Mr Lock’s valuation, the loss resulting from the failure of the BlackRock deal is £0.7m (£20.5m less £19.8m). That loss is extinguished by the compensation Toppan would have had to pay to Abbey, calculated at £809,145.

When Mr Taylor was cross-examined, he accepted that with the BlackRock deal:

“the operator though was paying more rent than it was with its existing lease to Toppan.” (see Day 2, page 119, line 19).

He also accepted that the £1.2m rent was high and it was going to be difficult for Abbey to afford when the care home was half full.

Later, Mr Taylor was asked who would support Abbey for the first two years of the BlackRock Deal if it had gone ahead:

“1

Q. Not that you’re aware, no.

2

So does it not follow, then, Mr Taylor that

3

Toppan’s claim for what it says it’s lost as a result of

4

the deal with BlackRock not going through should in

5

principle at least give credit for the compensation that

6

it would have had to have paid to Abbey in rent, for the

7

difference in rent?

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A. I’m not sure.

9

Q. No, well, I understand the point in principle. Toppan

10

is claiming we would have sold the property to

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BlackRock, we would have had 20.5 million, we can’t sell

12

it to BlackRock now because they don’t want it anymore,

13

we can only get less now, and Toppan is claiming

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2.5 million as the difference, but, if the BlackRock

15

deal had gone through, Toppan, it seems, would have

16

inevitably had to have paid some compensation to Abbey,

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the difference in rent, for the fact that Abbey, was

18

getting a worse side of the deal for the first, few

19

years?

20

A. That had been very preliminarily discussed.

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Q. Okay, but it hadn’t changed, and I mean what do you

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say — — I mean, what do you say would have happened then

23

if the deal had gone through and Abbey is in tremendous

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financial difficulties paying the rent because trading

25

hasn’t picked up, as we know it didn’t in the first — —

__

1

in 2018? You’re not suggesting that Toppan would have

2

just sat back and taken the BlackRock money and let

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Abbey suffer financially ? You’re not suggesting that,

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are you?

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A. I can’t speculate as to what would have happened in that

6

event.

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Q. Why not? It’s sort of rational — — is it difficult to

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predict what ultimately Mr Sodhi would do or the

9

trustees would do?

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A. Well, I mean, the money may have been used elsewhere for

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developments.

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Q. Right.

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A. And again, it’s speculation years down the line.

14

Q. It’s possible, if the deal had gone through, Toppan

15

would have gone off, spent the money on a new

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development in Scotland and Spalding and just left Abbey

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high and dry paying 1.2 million rent that they couldn’t

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afford. Are you saying that’s plausible?

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A. No, the other — — more likely is the other operating

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companies as part of that same group would have

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supported — —”

It was this last answer I am unable to accept as being correct:

This head of claim is pleaded on two bases. First, Toppan claims for the continued interest payments made under its loan from Allied Irish Bank ("AIB"), which it says would have been discharged in September 2018 when the proposed sale to BlackRock completed. The sum claimed on this basis is £902,745. Second, Toppan claims for the profits it says it would have made by investing the proceeds of the lost sale with BlackRock. Toppan says it would have discharged the AlB loan, obtained equivalent funding elsewhere and invested £20.49m in the purchase and development of care homes, receiving high rates of return, of at least 6.25%, from September 2018. The amount claimed, after giving credit for continued receipt of rent from Abbey, is £1,765,937.50 to 31 October 2022, continuing at £31,718.75 per month.

The Claimants have advanced no expert evidence in support of this aspect of the claim.

This alleged loss is premised on Simply being liable for the loss of the sale to BlackRock which I accept is correct albeit no loss flowed from that loss of sale. The continued interest and investment losses are far too remote and are far removed from Simply's scope of duty.

In his second witness statement, Mr Taylor says that the Claimants would have developed sites in Spalding and Scotland (Airdrie), which had planning permission (paragraph 62) {C3/l/11}. In his first statement, Mr Taylor said there were "a variety of options available". He mentioned the two sites and said that in all likelihood the Group would have "either" developed "one" of these sites or sought a new site. The inconsistency in Mr Taylor's evidence suggests that there was no firm intention in this regard and certainly no firm intention to develop both sites, as is now said to be the case.

The only contemporaneous evidence as to Toppan's intended use of the proceeds of sale refers to an entirely different objective, namely to reduce the Lloyd's debt (on other care homes in the Group) by £2m. On the basis of this evidence, the amount of money available to invest must, at the very least, be reduced by £2m.

Even if Toppan can prove that it would have developed those sites (which I do not accept), the resultant loss of profit is speculative and far removed from Simply's breaches of duty.

There is simply too much speculation and too little credible evidence to support this fanciful claim. There is no business plan, no estimate of development costs, no analysis of likely rents or how long it could take to reach full occupancy. The proposed rate of return is far fetched and is meaningless without any analysis of

These claims as Simply contends are fundamentally flawed and are extremely speculative. I also find that these alleged losses are far too remote to be recoverable. These losses are not of the type or kind for which a party can be treated as having assumed responsibility see discussion on The Achilleas above.

Toppan contends that

Abbey's audited accounts for the year ending December 2019 were issued in September 2020. Toppan would have benefited from the Reduced Interest Rate from 2021 but for Simply's breaches of duty.

Instead, Toppan did not achieve the Reduced Interest Condition during the term of the loan.

The delay in Toppan achieving the Reduced Interest Condition as the result of Abbey not being able to achieve the target trading covenant caused Toppan to pay higher interest charges on the AIB Facility than would have been the case but for the Defects, in the sum of £38,878.25.

The loss is particularised in the table below. It comprises 0.5% of the average outstanding debt over the relevant period. 0.5% is the reduction in the interest rate to the Reduced Interest Condition. The relevant period is 1 January 2021 to 9 May 2022. There were 365 days in 2021. There were then 129 days to 9 May 2022.

This is not a global claim. Nor has it been alleged by Simply that this loss is too remote. Simply has again underestimated the impact of the defects on the care home’s occupancy. I am satisfied that Simply’s breaches of duty and the widespread defects in the care home were the dominant cause of Toppan failing to achieve the Reduced Interest Condition in the year ended 2019.

I consider that Toppan is entitled to recover £38,878.25 in respect of this claim which are the interest charges Toppan paid but would not have had to pay but for Simply’s breaches of duty.