Professional negligence – Breach of contract – Solicitor – Claimant suing defendant solicitor for negligence and/or breach of contract in relation to purchase of property – Whether defendant being in breach of duty – Whether claimant establishing causal link – Whether claimant failing to mitigate loss – Claim allowed
The claimant agreed to purchased from P a property known as 56 Avenue Road London NW8. The defendant acted as the claimant’s solicitors in relation to the transaction. Contracts were exchanged on 10 November 2010, when OHL paid a deposit of £2.575 million to the solicitors acting for P. Completion was due to take place on 4 April 2011 but, by a notice dated 1 April 2011, the claimant, by now represented by a different solicitor, served a notice purporting to rescind the contract. Proceedings followed between P and the claimant in which P sought a declaration that the claimant’s deposit was forfeit. The claimant counterclaimed for the return of its deposit and damages for breach of contract. Those proceedings were settled the night before trial on the basis that the deposit and all interest that had accrued thereon would be split equally between the claimant and P and each side would bear their own costs.
The claimant then claimed damages against the defendant for alleged breach of contract and/or negligence. The claimant’s case was that the defendant was in breach of duty by failing to discover or inform the claimant of the redevelopment of the site of two small schools near the property, so as to create an academy and specialist school for about 1,400 pupils in total, together with some residential units.
The defendant denied liability, contending that it was not under a duty to inform the claimant of the development, even though it was aware of it from a search carried out of extant planning permissions and applications within a radius of 300 metres of the property, but in any event, the losses claimed were not caused by the alleged breach of duty and/or the claimant had failed to mitigate its loss by failing to complete on the basis that the development had not diminished the value of the property at exchange to less than the price payable for it under the claimant’s contract with P; and/or that the costs of the P litigation were unreasonably increased by the failure of the claimant to mediate that dispute or offer to settle it at a much earlier stage than immediately prior to trial. Furthermore, the claimant had failed to mitigate its loss.
Held: The claim was allowed.
(1) In general a solicitor was not obliged to undertake investigations that were not expressly or impliedly requested by the client. If in fact a solicitor acquired information that might be of importance to a client, then it was the duty of the solicitor to bring that information to the attention of the client. The defendants could not be criticised if in fact they had not carried out a Plansearch. However, having done so, the defendant came under a duty to explain the results to its client. The solicitor dealing with the case had not carried out an inspection on the ground nor any further research as to what the planning permissions were for. Thus, he was not in a position to form any view concerning the contents of the Plansearch report or whether it might affect the decision of the claimant to purchase the property.
The duty to communicate matters actually known to a solicitor was to communicate information that might be material, thereby setting the threshold for information to be communicated at an intentionally low level. Solicitors did not generally advise on the business merits of transactions they were instructed to facilitate. The business judgments involved were those of the client, not the solicitor, and it was for the client to judge the impact of the material that might be relevant, not the solicitor. Whether the solicitor agreed with the client’s judgment, or with the grounds on which it was arrived at, was immaterial. However, a reasonably competent solicitor with the Plansearch report to hand would not have unilaterally assumed that only developments within 100 metres were material. If that approach was to be adopted, then a much more careful and qualitative analysis of the various planning approvals would have to be undertaken. The defendant solicitor was in breach of his duty by failing to include a summary of the effect of the Plansearch report, the further investigations that could be undertaken with the local planning authority without undue difficulty, cost or delay, and to invite instructions in the light of that summary. By doing so, he would have given the claimant the opportunity to decide whether to proceed, withdraw or obtain further information before deciding.
(2) Even on the basis that this was a commercial investment, the claimant was fully entitled to the view that the development was an adverse factor that militated against proceeding. Merely because a valuer said that the price agreed reflected the present value of the property taking account of the school was not the point. It was far more difficult to say what the effect of such a development would be on the future value of the property after refurbishment, or on the ease with which it could be sold, particularly in a small market for high value residential properties, both of which factors were highly material where property was being purchased as an investment for capital gain purposes. The claimant was entitled to decide that the development altered the risk profile presented by the acquisition and refurbishment of the property. There was no question that the funds to complete were available. Therefore, the claimant had established the causal link necessary to maintain its claim in damages for breach of duty against the defendant.
(3) The duty to mitigate was a duty not to expose a contract breaker or tortfeasor to additional expense by reason of the claimants not doing that what they ought reasonably to have done. However, it did not impose on the plaintiff an obligation to take any step which a reasonable and prudent man would not ordinarily take in the course of his business. It was difficult to see how proceeding with a transaction that a claimant judged to have become inopportune could not come within the scope of that qualification. Whether the claimant had acted reasonably was not to be judged too harshly when the breach had placed the claimant in a difficult position. The notion that the claimant was required by the mitigation principle to complete the purchase of the property by paying the balance of the purchase price of in excess of £22 million when in her judgment the transaction was no longer commercially attractive was unsustainable: British Westinghouse Electric and Manufacturing Company Ltd v Underground Electric Railways Company [1912] AC 673 and Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452 applied.
(4) When and on what basis an approach was made by a party to mediate was a judgment call. Having embarked on litigation to mitigate the losses for which the defendant would otherwise be liable, it was not open to it to second guess the judgment of the claimant’s advisers after the event as to how they should have conducted the litigation other than in very clear and obvious circumstances. There was no evidence that the claimant was refusing to take the advice it was given from its’ solicitors or that the claimant’s solicitors were refusing outright to mediate.
John Wardell QC and Geoffrey Zelin (instructed by Wedlake Bell LLP) appeared for the claimant; Joanna Smith QC and Tiffany Scott (instructed by Triton Global Ltd, of Leeds) appeared for the defendant.
Eileen O’Grady, barrister