Plaintiffs purchasing site for development – Vendors’ defective title – Solicitor’s negligence – Downturn in property market – Plaintiffs not selling on site to developers – Plaintiffs developing site themselves and curing defect in title – Measure of damages
The plaintiffs, a company and two individuals, were involved as a partnership in the development of property. The defendant was formerly the solicitor to the partnership and acted for it in 1988 in connection with the purchase of land known as Northdene Nurseries, Whittlesey, Cambridge (the site). By letter dated May 12 1988 the vendors of the site, who had obtained planning permission for the erection of 30 bungalows, granted the plaintiffs an option over the site. Concerns about access to the site were raised and the defendant was specifically asked to investigate the question in greater detail.
On August 4 1988 a purchase price of £799,000 was agreed. On October 6 1988, the day fixed for completion, it emerged that the vendors were unable to show clear title to the access to the site. The plaintiffs had intended to sell the site on, but, as a result of the downturn in the property market, decided instead to develop it themselves and, having obtained the necessary defective title insurance, proceeded to do so with the access as originally planned.
The plaintiffs brought proceedings against the defendant alleging breach of contract and negligence. Liability was admitted, inter alia, in that a defect in title had been shown and that the defendant should have advised the plaintiffs to take out defective title insurance and not complete until such insurance was in place. The plaintiffs contended that, had the defendant advised them properly, they would have instructed him to obtain defective title insurance, but that they would have used the defect as an excuse to delay completion and would have withdrawn when the market collapsed. They claimed damages on the basis of the difference between the price paid under the option, £799,000, and the true value of the site at that date with no access for development, which was £67,000. The defendant argued that there was no reason why the defective title insurance would not have been in place and, had it been in place, completion would not have been delayed by the plaintiffs, because it would have already taken place.
Held Judgment for the defendant.
1. On the evidence it was clear that the earliest time when the plaintiffs would have withdrawn was early February 1989. But for the defendant’s negligence, defective title insurance would have been sought and obtained and would have been in place by the first few days of January 1989, at the latest. It followed that the plaintiffs had failed to establish their case that the insurance would not have been in place by the time in early 1989 when they first became aware of the collapse in the property market.
2. The plaintiffs had claimed damages for the loss attributable to the inaccuracy of information supplied by the defendant, namely the amount by which they had overpaid in buying the site which they thought had no defect in title, whereas they actually bought a property with a defect in title: see Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191, per Lord Hoffman. The defendant was liable only for losses that were reasonably foreseeable consequences as at October 6 1988, the time of breach, which were that the plaintiffs bought a property with a defect in title which was capable of being, and was in due course put right. Had the plaintiffs made out their claim, it would not have been appropriate to apply the diminution of value rule (see County Personnel (Employment Agency) Ltd v Pulver & Co [1986] 2 EGLR 246, per Bingham LJ, at p249) and damages would have been assessed at the date of judgment, when the plaintiffs were in possession of a site with a good title which was exactly what they had contracted to buy.
Simon Monty ( instructed by Fielding Griffiths, of Bagshot) appeared for the plaintiffs; Mark Lomas (instructed by Cripps Harries Hall, of Tunbridge Wells) appeared for the defendant.
