Orientfield Holdings Ltd v Bird & Bird LLP [2015]
In Orientfield Holdings Ltd v Bird & Bird LLP [2015] EWHC 1963 (Ch) (26 June 2015) the Claimants claim was for damages arising out of an alleged breach of contract and/or negligence relating to the purchase of a property in London where the Defendants had been the Solicitors acting for them in the conveyancing transaction. Contracts had been exchanged, a deposit paid by the buyers of £2.575 million and completion fixed for the 4th April 2011.
In this action the Claimants sought damages from their former Solicitors, the Defendant, as they contended that their former Solicitors were in breach of duty as they had not informed them of the impending development of a school, which the Defendants had been aware of from a search carried out by them.
The trial took place during June 2015. The Defendants argued that the Claimant had bought the property solely as an investment in central London whereas the Claimants said it was bought as a residence in retirement for the owner of the Claimant Company.
The Conveyancing transaction included a Property Information Form completed and signed by the Sellers. In the question headed Notices and Proposals they had marked ‘no’ in respect of any notices or letters received which would affect the property and in answer to whether the sellers were aware of any proposals for development nearby, they had written that the buyers should make their own enquiries, which the Defendants Solicitors had queried with the sellers solicitors as being an unsatisfactory answer.
In email correspondence the sellers solicitors told the Defendants to carry out a Plansearch which they did and which revealed all the planning proposals for the area including the school. The Defendant Solicitors sent their report on title of 9th November 2010 to the Claimants without revealing the results of the Plansearch and confirming to the Claimants the local authority search result “which does not reveal anything adverse”.
After receiving the report on title the Claimant gave instructions to the Defendants to proceed to exchange of contracts with the deposit of £2.575 million paid.
The Claimants friend in this Country discovered through talking to neighbours, the proposal to redevelop the school and as a result contacted a property litigation lawyer for advice as to the conduct of the transaction by the Defendants .
The Claimant then contacted the Defendant via emails who sent her a copy of the Plansearch result with a comment that as they had not seen the search result, they may wish to take independent legal advice. The Claimants friend then referred her to the property litigation lawyer.
Email correspondence followed between the Claimant and Defendant asking for the purchase to be rescinded on the basis that the sellers had not disclosed the school development. The Defendant did not follow up on this or advise the Claimant to obtain a valuation of the property before rescission. The Defendants appointed Counsel to advise on whether the sale should be rescinded. Counsels advice identified three reasons why rescission would prove difficult and also risky, one being that there was no evidence the notice of development had been sent to the property.
A property litigation lawyer was subsequently engaged by the Claimant and notice of rescission was served on the basis that
- “the answer to question 3.1 in the PIF was untrue because (i) the Plants had received notice of application for both outline planning permission in 2008 and detailed planning permission in 2010, (ii) the Plants had commissioned Knight Frank to submit a detailed objection on their behalf at outline application stage and (iii) with others, had objected via Boisot Waters Cohen at detailed planning stage”.
Negotiations took place and the proceedings were settled before trial.
The Claimant brought proceedings against the Defendants for breach of contract or duty and their failure to let the Claimants know about the Plansearch results and the Defendants failure to investigate the results, the Defendants “denied breach and causation and allege a failure to mitigate and also assert contributory negligence”.
His Honour Judge Pelling on considering Breach of Duty found in his judgment that the Solicitor from the Defendant company
- “was in breach of his duty by failing to include in the ROT a summary of the effect of the Plansearch report, the further investigations that could be undertaken with the LPA without undue difficulty, cost or delay, and to invite instructions in the light of that summary. By doing so, he would have given Ms Chow the opportunity to decide whether she wished to proceed, withdraw or obtain further information before deciding”.
In considering Causation, His Honour Judge Pelling ruled that the final point to prove this issue was the email to the Defendant Solicitor acting on the property purchase where the Claimant had said
- “I am sure I would not have entered into the purchase agreement if I had known that there was going to be a school for 1250 pupils and 250 staffs in the same block as my property.”
He continued that even though the Claimants had become aware of the Defendants failure to reveal the results of the Plansearch and had taken other legal advice, he did not believe that the email was anything other than it was “reflective of her honest belief at that time”, which she had expressed long before the start of the proceedings. He was satisfied that the Claimants had “established the causal link necessary to maintain its claim in damages for breach of duty against the defendants”.
The Defendants made two points as to mitigation in that the Claimant had failed to mitigate its loss because it had not completed the transaction and in respect of the Sellers of the property and their proceedings against the Claimant, it did not mitigate the costs by way of mediation, earlier than it did.
Judge Pelling found the idea of the Claimant completing on a more than 22 million pound purchase when this was no longer a commercial viability would not be feasible and the suggestion that she should have undertaken a valuation before rescission to see if the development had affected the price is unrealistic, the problem only came to light a week before completion. In considering all the matters he did not accept the duty to mitigate meant the Claimant would have to complete its purchase “simply because that would have been less burdensome for the defendants”.
With regard to the mitigation aspect the Judge referred to the action started by the sellers and the counter-claim by the Claimants for their deposit to be returned resulting in the Claimants mitigating the losses which would have been the liability of the Defendants. The Judge referred to “the usual principles identified by Lord Haldane in the Westinghouse case quoted already, OHL would be entitled to recover as part of its damages the costs of those proceedings.”
The Judge rejected the submission by the Defendants that mediation should have happened sooner and that costs after the end of April should not be recovered as part of the damages from the Defendants. The Judge rejected this. He looked at the whole case and all the surrounding circumstances and observed that either one of the parties to the action would end up meeting part of the claim dependent upon what happened with the sellers litigation. The Judge could not accept the Defendants claim that the Claimants had failed to mitigate its loss and therefore should not recover part of their costs after the end of April 2013.
Judge Pelling then considered contributory negligence and reasoned that there was insufficient evidence to suggest the owner of the Claimant Company would have anticipated a valuer would have been aware of the redevelopment. He pointed to the Defendants report on title where the advice was to arrange for a valuation, making the valuer aware what was in their report “You should ensure that the valuer is aware of the matters mentioned in this report, as these may have an impact on the valuation.” The Judge considered this to mean that the valuation was of the property as referred to in the Defendants report on title.
His Honour Judge Pelling found that the Claimants claim succeeded and he asked for submissions from the parties as to what sum should be entered in respect of the judgment since he understood that the sums claimed had been agreed.
Not a surprising result. The claim could have been avoided by simply passing the Plansearch Report to the client.