Bacciottini & Anor v Gotelee and Goldsmith (A Firm) [2016]
In Bacciottini & Anor v Gotelee and Goldsmith (A Firm) [2016] EWCA Civ 170 (18 March 2016) the matter came before the Court of Appeal as to an issue on the applicable measure of damages in a professional negligence claim against their former solicitors. The Defendants were a firm of Solicitors who had admitted negligence acting for the Claimants in a property matter.The First Claimant, an experienced property developer and the Second Claimant bought a property together as a shared development project. The property had a guide price of £575,000. The Agents particulars referred to the potential to include the barn as a self-contained part of the property subject to planning consent with another outbuilding referred to as “the Jam Factory.” They paid an extra £25,000 for an adjoining garage included in the purchase.
The Claimants instructed the Defendants to act for them at the asking price. They were to renovate the property, develop the barn and “the Jam Factory”, sell on the properties and live at “the Granary” whilst the works were taking place, with instructing an Architect and carrying out planning assessments. They signed their business partnership document on the 27th April 2007 and the purchase and sale contract prior to their departure to Italy.
The First Claimant had been chasing the search results and was informed on the 10th May 2007 they were clear. He asked about the 1974 change of planning use for the Granary and was informed there was no adverse entry.
Exchange of Contracts took place on the 14th May 2007 with completion on the 27th May 2007 at the price of £600,000 with a mortgage of £495,000.
The First Claimant moved into the Granary permanently in May 2008. The Claimants instructed new Solicitors and were shocked to discover that the 1974 planning consent change of use of the Granary was conditional upon the Granary “only being used for residential purposes in conjunction with the occupation and ownership of Snape Hall” which had been sold independently many years before.
The First Claimant in his witness statement said he would not have purchased the property at £600,000. He would have renegotiated the price to reflect the planning or might not have proceeded. They relied upon the Defendants to carry out the searches and advise them of the result.
Lord Justice Davis said that the First Claimant, who continued to live at the Granary, knew of the restriction and had been advised to make an application to remove it on the understanding the prospects of success were good. The First Claimant made the application in January 2009 including his proposal to extend the Granary and convert the barn. After contacting the planning department he applied to remove the restriction with a separate application for the development. The removal of restriction application was made on the 8th September 2009 at a fee of £250 and approval given the 3rd November 2009. The barn and extension applications were also successful.
The Claimants issued their claim on the 12th March 2013 in the Chancery Division that, if they had received proper advice as to the planning restriction they would not have purchased and the correct value of the property with the restriction did not exceed £300,000.
The Defendants asserted that “The planning restriction could be (and was in fact) lifted at very little cost and did not have a material effect on the value of the property, which was in the region of £600,000”.
The Claimants expert’s opinion was that in May 2007 the prospect of a successful application to remove the restriction was in doubt and that the property would be worth no more than £300,000.
The Defendants first report from their valuation expert was that the value at May 2007 was £550,000 against £600,000 sale price and with the restriction around £450,000 but, there would most have been negotiations.
HH Judge Simon Barker in the Chancery Division rejected the Claimants contention that the restriction not only affected the Granary but all the buildings. Lord Justice Davis observed there was no appeal against that, Judge Simon Barker had “noted that the context was that of the case against the respondent firm being one of failure to provide information”. He found that the prospects had been good around 2007 to remove the restriction:
“ 58. On the evidence before me, I accept Mr Fletcher’s opinion as to the diminution in value on the basis of a very high likelihood that an application to lift the 1974 condition would be successful. Accordingly, the actual value of the property at the material times in 2007 was some £450,000, and the overpayment some £100,000.”
He had also referred to Claimants counsel when she said that her clients would either have purchased at a price which reflected the actual price or would have withdrawn not spending any money. Judge Barker said:
“60. I do not agree that the choices were that straightforward. In particular, I am not persuaded that there were only two possible outcomes. On the contrary, I think that Mr Fletcher’s observations and evidence of alternative outcomes, which would involve one or other of the parties applying for the 1974 condition to be lifted, is a more likely outcome than Mr Bacciottini and Ms Cook simply purchasing at £450,000 or walking away.”
He also said that it was a “a simple, obvious and cheap step to take” to remove the restriction and rejected that any negotiation would have resulted in a sale of anything near £450,000 and that an award of damages “would overcompensate” the appellants”.
He concluded that “It follows from this that the loss claimed, the overpayment, if, contrary to my judgment, that is the correct measure of loss, was eradicated by mitigation. It also follows that the special damages claim fails.”
Lord Justice Davis considered that in order to examine the arguments submitted by counsel it was necessary to refer to the relevant authorities. He cited several reported cases where he said within this area there are many, “the core principle in cases of this kind – is Livingstone v Rawyards Coal Co.(1880) 5 App. Cas. 25. As stated at page 39 by Lord Blackburn, the measure of damages ordinarily is:
“….that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been if he had not sustained the wrong for which he is now getting his compensation or reparation.”
In Philips v Ward 1956 where Lord Denning stated:
“The general principle of English law is that damages must be assessed at the date when the damage occurred, which is usually the same day as the cause of action arises……..”
He observed that Claimants counsel had opened his case with the general principle in Philips v Ward and, in particular, had his clients been advised properly, they could have bought the Granary at a reduced price through negotiation. Defendants counsel contended that the application to remove the restriction was successful and to award them damages on reduction in value at the time they bought would overcompensate them in respect of loss, which they have not suffered.
Lord Justice Davis concluded that there was much less to the case than appeared and the Judge had reached the correct conclusion. He referred to the core principles in Livingstone v Rawyards Coa Co and by removing the restriction the Claimants had not suffered loss for which they could be compensated.
“By reason of the subsequent removal of the restriction, the appellants have suffered no loss and there is nothing in respect of which they require to be compensated. That is the nub of it.”
Referring to Claimants counsels submission “The problem with Mr Halpern’s approach is that it in effect precludes consideration of subsequent events. But there is no reason why subsequent events necessarily should be precluded. Mr Halpern in terms submitted that where a case was a “capital loss” case, as he styled it, then subsequent events are always irrelevant. There is no authority to support so sweeping and generalised an assertion: and it would be contrary to the approach taken in cases such as, for example, Kennedy v Van Emden and Gregory v Shepherds. Moreover, consideration of issues such as mitigation and avoidance of loss necessarily will be geared to events occurring or steps taken after the date of breach and after the cause of action has accrued. Philips v Ward was simply a case where such issues did not arise. It did not purport to say that such issues could never arise”
He found there to be no proper basis for interfering in what the trial Judge decided. He added that his view which coincided with the Judge’s view was that it was of no relevance that over two years had passed before the restriction was removed as once the application was made, it was granted within a few weeks.
He referred to Claimants counsels submission that his clients were denied the opportunity of buying the Granary, with the restriction, at a reduced price then after making the application to remove it, increasing the value of the property, which did not impress him.
He noted that Defendants counsel had acknowledged the Claimants shock and upset when they discovered the restriction but had commented that is was a matter of “all’s well that ends well” and that it was not a matter to pursue a claim.
Lord Justice Davis considered it was not a claim for distress or inconvenience which, in any event, would attract a small award but, in this case, there is no mention of the Claimants having to rent other accommodation, that their costs for the proposed redevelopment were increased or the restriction prevented a quick profitable sale.
He found there to be no claims for special damages on the claim for diminution in value and upheld Judge Barker’s decision. Lord Justice Lloyd Jones and Lord Justice Underhill agreed.