JUDGE HAWKESWORTH:
1. This is a claim for damages arising from the professional negligence of the claimant’s solicitor, Mr Desai who acted for the claimants in negotiations with Harringay Council over the purchase of the family home, 30 Grosvenor Crescent, Tottenham, London E15 (“the property”).
2. The first claimant is the son of the second claimant. They had instructed Mr Desai, then of a firm Timmis Desai(?) in early 1999 to proceed under the Housing Act 1985 Right-to-Buy Procedure. Liability is admitted since it is accepted that Mr Desai, who joined a defendant firm in April 2000, failed to give proper advice to the claimants and give adequate warnings of the expiry of time limits under the right-to-buy procedure.
3. The claimants’ application under the right-to-buy procedure was deemed withdrawn on
4. The defendants defend the claim fundamentally on the issue of causation. They deny, firstly, that the claimants can show on a balance of probabilities that they were ever in a financial position to exercise the first right-to-buy. Secondly, if it is shown that they were and that they lost the right-to-buy by reason of the defendants’ negligence, they failed in their duty to mitigate their loss by exercising a second right-to-buy at a price of £94,000, which was offered in August 2001. That right-to-buy also lapsed, the claimants say because at that time they had not sufficient means to purchase at that higher price and they were being advised by Mr Desai the Council was at fault in regard to the loss of first right-to-buy, so that they could still purchase at the first original price offered of £49,000.
5. Ultimately, the house was purchased in January 2005 outright, with funds provided by the first claimant after a successful business transaction. However, the claimants also seek to recover damages for distress and inconvenience for the period during which the first two abortive right-to-buy applications were proceeding. The defendants deny that the circumstances are such as to give rise to a claim for damages under that head.
6. The second claimant, Mrs Yvonne Blackwood, from whom I heard evidence, is 64 years of age and had been a Council tenant of Harringay since 1967. She moved to the property in 1979 and has lived there ever since. She and her former husband had four children – Beverley born
7. It is clear that Mrs Blackwood was a hard working lady who has suffered tragic bereavements in her family life, resulting from the untimely death of both her elder daughters. In 1998 her daughter Paula, who had special needs, became ill and suddenly died at the age of 35 after a relatively short illness. This was a devastating blow for this close knit family and hit her sister Beverley particularly hard. She became depressed and started to lose weight dramatically.
8. Beverley was working for Asda at this time as a Customer Services Manager. She was living at home with her mother, having recently separated from her long-term partner. Alan was also living at home but was not in employment, being still at college. The first claimant, whose evidence I also heard, was in business with a partner, Mr Carl Harrison, who ran a bar at
9. The plan initially was to purchase the property in the name of the four adult family members, the first and second claimants, Beverley and Alan. Purchase would be by way of a mortgage which would be serviced by payments from Beverley and the first claimant and the second claimant would, as she said, try to chip in.
10. From the outset the first claimant dealt with all the paperwork necessary for the purchase of the property. The approach to Mr Desai, whose then firm Timmis Desai was in
11. On
12. Mr Desai, in correspondence with the Council’s solicitor, appears to have agreed a date for completion as
13. On
14. However, it became apparent at some time, probably in mid-2000, that if the original plan of purchasing in all four names was to proceed the mortgage would have to be in all four names. This provided difficulty because Alan was not earning and Beverley had ceased work after her accident and was gradually deteriorating in health, suffering from anorexia nervosa, so that she never returned to her job. There were also difficulties in adding the second claimant to the mortgage because of her age.
15. Matters dragged on into the summer of 2000. The Council served a first notice to complete, section 140, dated 14th June 2000 and a final notice to complete, section 141, dated
“I am writing to report that my colleagues spoke to Harringay Council concerning their section 140 notice. My colleague was told that the Council were under a statutory obligation to serve the final notice to complete and will be doing so shortly. However, the notice period of 56 days in which to complete the right-to-buy does contain a certain amount of flexibility provided the Council are satisfied that the matter is nearing completion. It is therefore important that your financial arrangements are sorted out almost immediately to take advantage of this right-to-buy.”
16. The first claimant’s evidence was that in relation to that letter he asked Mr Desai’s assistant, then a Mr Renata Meribel(?), to obtain an extension of time and he was assured she would do this. Whether this was ever in fact done remained for some time unclear. Certainly, the first claimant was given no warning by the defendants that the guillotine was about to fall and the Council having, on their case, received no request for an extension, treated the application as withdrawn as at
17. On 19th December the defendants wrote to the Council asking if the application could proceed in just the name of the first defendant claimant. How they responded by letter dated 19th September stating that the application was deemed withdrawn. It is clear from the evidence of the first claimant from the letter which he wrote to the head of the legal services at the Council, dated 4th January 2001, that he was profoundly dismayed by the Council’s stance and by his solicitor’s failure to obtain an extension of time. In his letter he set out that he had requested the defendants to obtain an extension of time, and goes on:
“Meanwhile, and whilst my sister Beverley has been hospitalised, I managed to arrange for a mortgage at the Halifax Building Society only to be told that the matter cannot proceed because the Council’s offer had expired. I have only just been made aware of this problem and I understand that this is due to the fact that Saunders & Co did not contact your office until the final day of the offer to inform you of progress and request a small extension of time. Then they failed to follow up the request for in writing as asked for by your officer which I am horrified about and will be taking the matter up with them.
However, I do need this matter to proceed as soon as possible for the sake of my sister’s health and for the fact that I will now shortly lose my mortgage offer. Under the circumstances, could you please see your way to keeping the offer open for a further month or so in order to complete matters.”
18. The first claimant maintained in his evidence that had he been told the final cut-off point and been given proper advice he would have put the defendants in funds in order to complete the purchase. He would have done so, he maintained, either by putting in place a mortgage and using his own resources for deposit or by funding it himself entirely.
19. Mr Chapman, on behalf of the defendants, called no evidence. He cross-examined the first claimant upon the basis that on the information disclosed by the first claimant, which disclosure he submitted was seriously deficient, the first claimant would have been unable to obtain a mortgage and in any event did not have the funds available at the relevant time to enable him to complete the purchase. The relevant period, he submits, was that immediately before
20. Had Mr Desai or his assistant taken full instructions from his client for the purposes of giving him advice, then it should have been apparent also that the mortgage position in particular required careful consideration and, in addition, it would be necessary to explore in good time the Council’s attitude to an application by Mr Blackwood to purchase in his own name.
21. No advice was given by the defendants at the time to the first claimant that his application could not proceed on that basis. Nor is it pleaded that such an application was bound to fail. Neither has evidence been adduced from the defendant to support such a contention. The Council were content to add the first claimant’s name to that of his mother to the application and I do not consider that there is justification for the conclusion that an application to purchase in the first claimant’s sole name would have been refused in all the circumstances.
22. Clearly, however, if the purchase was to proceed on that basis it was the defendant’s duty to ensure proper advice was given at a stage which allowed sufficient time to put these matters in place, both in relation to a mortgage offer and in relation to the Council’s consent. That could and should have been achieved by proper advice as to time limits and the seeking of an extension if necessary.
23. Mr Chapman submits that this approach was clearly a last resort since, as Mrs Blackwood confirmed in her evidence, her wish was for the property to be purchased in the name of all the adult family members. She would have resisted a purchase in the sole name of her son unless there were no other ways forward. It is also further submitted that for a number of reasons the mortgage was not a viable option and the very fact that it was being pursued supports the defendants’ case that a purchase funded entirely from the first claimant’s resources was not possible.
24. Mr Blackwood maintains that this is not correct and if for any reason he had been refused a mortgage or the Council did not permit the purchase in his sole name, he was in a position to provide funding so the purchase could have gone ahead in the name of all four family members.
25. In 1995 the first claimant had formed a company with Carl Harrison called
26. A reconciliation statement shows withdrawals from this account. £61,000 was invested through stockbrokers in stocks and shares. These shares fared badly, no doubt in line with the general decline following the dot com bust in 2000. The shares were, however, worth in round figures £75,000 in June 2000, £45,000 in September 2000 and £38,000 on
27. Mr Chapman tested this assertion in cross-examination by suggesting that the shares were purchased as a tax reserve to cover the first claimant’s Capital Gains Tax liability on the sale of
28. The first claimant’s income from Stringbase Limited, the company which had been formed to run The Spot,
29. In addition to his share investments, the first claimant had also invested money in other small businesses in early 2000 from which he was able to claim tax relief in respect of his capital gains. I have no doubt that he was aware well before the end of the tax year that he would have a substantial Capital Gains Tax liability. The first claimant denied, however, that his share investments were made effectively to cover that liability and to earn profits before the tax became payable.
30. Mr Chapman submits I should look at that evidence with scepticism in the absence of any disclosure of his accountant’s file and that his response in cross-examination that “have to ask my accountant” was disingenuous. Certainly, it would appear that prior to the signing of the tax return in April 2001 the first claimant was aware of the tax relief available on his Capital Gains and had made his first qualifying investment by withdrawal from the Merrill Lynch account in February 2000. I am prepared to accept that the first claimant had awareness that he had some future tax liability, but I do not accept that his state of mind was such that the need to satisfy that liability at some future time, which was capable of being postponed and was ultimately reduced to a minimal amount to taper relief and offset losses, overrode his desire to purchase the family home and rendered the investment or the balance in the Merrill Lynch account untouchable and unrealisable for that purpose if it was ultimately necessary to make use of it.
31. The balance in the Merrill Lynch account, held it would appear in equal shares with Carl Harrison, stood at £24,000 in July 2000, £20,000 in September 2000 and £18,500 in October 2000.
32. The first claimant had also remortgaged his house in September 2000 for just over £200,000 producing a surplus of £44,000 which was paid into his Abbey bank account. This was an interest only mortgage with repayments of £720 per month. The size of that mortgage, with his relatively modest income, no doubt would have, and probably did, affect the size of any advance would could be made in respect of the property. The
33. In the event, having considered the financial documentation disclosed by the first claimant and despite its limitations, a picture emerged with sufficient clarity to satisfy me that funds were available to the first claimant which would have enabled him, given proper advice which allowed him adequate time to comply with deadlines, to put the defendants in funds to enable the purchase of the property to proceed. Whether that would have been by way of mortgage and deposit provided from his funds or by realising his investments and the balance in his Merrill Lynch account to provide the entire sum required cannot now be answered. I am, however, persuaded by the first claimant’s evidence that the importance of this project to the family as such and faced with an ultimate deadline the money would and could have been found.
34. I move on therefore to the second right-to-buy application. This was made on the advice of the defendants on
35. The first claimant’s evidence was that throughout 2001 Mr Desai had been maintaining the position that Harringay were at fault and that his assistant, Renata, had made an valid application for an extension of the first right-to-buy application which had been in time.
36. On
“I have already advised you previously that you did have the ability to seek an extension prior to the final notice expiring which was done on your behalf, and as you point out in your letter to the Council on 5th January notified to you. If the Council choose to disregard my former colleague’s version of events, coupled with your recollection that you were in fact told by her that an extension had been granted, leaving them to the conclusion that they are right and the matter can only receive under a new right-to-buy notice to your mother dated 7th August 2001, a clear conflict would in those circumstances arise in this firm continuing to act on your behalf in this matter.”
37. It became clear, however, that Harringay were maintaining their stance and Mr Desai suggested obtaining counsel’s opinion. Conference with counsel took place on 20th November and a copy of counsel’s opinion was sent to the first claimant the following day. This made clear that there was in reality no prospect of pursuing the first right-to-buy application. It also advised the claimant of a potential claim in negligence against his solicitor and a consequent conflict of interest. By this time, as is clear from Mr Desai’s letter to the claimant on
“You indicated to me that you did not wish to indicate your intention to the Council under the right-to-buy provision simply because if you did so you would be accepting the Council’s position, that your mother no longer had any rights under the previous attempt to exercise her right to buy in consideration for the property was £38,000. This is plainly the wrong figure.”
38. Mr Desai’s letter of 21st November enclosing counsel’s advice also made clear that in the circumstances the claimant should seek independent legal advice. Mr Desai did, however, continue to deal with the Council and sought a settlement meeting which was refused. Correspondence with the Council concerning the alleged request for an extension of the first right-to-buy continued into January 2002, by which time the second right-to-buy had expired. On
“I have copied the Council’s latest response dated
I do not think I can take this aspect of the matter any further on your behalf and as previously advised you may wish to consider seeking independent legal advice on the best way forward for you. Importantly, you should also now consider your mother’s position in relation to the Council’s fresh notice to her to exercise her right to buy.”
39. Sadly it was at this time that Beverley was gravely ill and she died on
“The difficulty that I was experiencing was not in finding the purchase money, but in finding a lender who would mortgage in all our names. I had already remortgaged my own home in October 2000 for an additional £46,000 for works I have not yet started, so I had the money available. After Beverley’s illness worsened she was placed on long-term sick leave and therefore her salary could no longer be taken into consideration by a lender. We agreed, therefore, that if we were unable to obtain a mortgage for 30 Grosvenor Crescent within Harringay Council’s time constraints we would use my funds to purchase 30 Grosvenor Crescent, then continue to look for a lend by which time I would reimbursed.”
The letter concluded:
“We followed counsel’s advice and submitted a fresh right-to-buy application. Unfortunately, the Council were now following a new set of valuation guidelines limiting the tenants’ discount. The new purchase price of the property had nearly doubled to £97,000 and placed it beyond my family’s reach. I have discussed this matter with my family and it is clear that we would not be in this position if it were not due to your neglect and you and your company must assume full responsibility for this neglect to provide the financial shortfall between the original 1999 offer price and Harringay Council’s second valuation for £97,000 in order that we can still buy this property.”
The latter suggestion was not open to the parties in fact, however, since the second right-to-buy had lapsed in December.
40. In approaching a submission made on behalf of the defendants that the claimants failed to act reasonably to mitigate their loss by proceeding with the second right-to-buy application, Mr Chapman recognises his difficulty in submitting that funds were available for that purpose in 2001 when his primary submission is that insufficient funds were available in 2000, but he submits that although the price had almost doubled by March 2001 there were hidden assets available to the claimant which he has not disclosed. Put shortly, he points to the ultimate sale of the claimant’s shares in Stringbase Limited and his interest in
41. The extensive complaints made by the defendants of non-disclosure by the first claimant which were pursued at the outset of this trial on an application to strike out a claim on those grounds centred upon the belief that in respect of the second right-to-buy the claimant had made investments into Stringbase. It was the sale of this company and associated freehold to the sum of £3.5m which finally enabled the first claimant to purchase the property £177,000 on the third right-to-buy application. The claimant’s case was that he had made no such investments, save for his work and running The Spot.
42. A Mr Kenneth Todd became an investor in Stringbase and he purchased 35 shares, Mr Harrison and the claimant holding 25 shares each. On
43. In 2004 Mr Todd bought out the claimant and Carl Harrison’s shares and he agreed to pay £400,000 for their 30 per cent interest in the premises. Further, Mr Todd agreed to pay the first claimant £200,000 for his shares in Stringbase. It was only on realising those interests that the first claimant was able to fund the purchase of the property.
44. Having requested a copy of the Trust Deed it was only on the second day of the hearing that it was provided, it having been requested from the claimant’s solicitors and the solicitors who dealt with the sale in 2004. Mr Chapman submits that the wording of the Trust Deed suggests that some contribution to the purchase price was made by the first claimant and Mr Harrison. It was unlikely that Mr Todd would gift a 15 per cent share in a valuable property to both Mr Harrison and the claimant. He also submits that the 2005 tax return completed on behalf of the first claimant suggests in its figures some kind of contribution having been made by the first claimant for the purchase of the freehold. While I accept that the figures are difficult to reconcile, the Trust Deed is capable of bearing the interpretation which Mr Chapman suggests, I am able to conclude in the face of the first claimant’s evidence, which is uncontradicted by Mr Desai who was thoroughly familiar with the first claimant’s business affairs, that he had available funds in 2001 which could have been utilised to raise the purchase money for the property. Nor do I consider that it was in any event reasonable for him to act on the second right-to-buy while Mr Desai was still his solicitor and was maintaining his stance in October 1991 that the Council could be persuaded to re-open their first right-to-buy offer of £49,000.
45. The first claimant was plainly placed in a dilemma arising from the negligence of the defendant, which he expressed in his letter to Mr Desai in which he felt that he might prejudice his position if he proceeded with the second right-to-buy. Mr Desai did not advise the claimants to proceed with that application at that time, making clear it was without prejudice to their claim that the first right-to-buy application should be kept open. Indeed, he made no observation at all relating to that stance taken by the first claimant. The assets available to the first claimant had in any event dwindled further by the end of 2001 from their worth in October 2000. In my judgment, the first claimant was entitled to maintain his stance that at £94,000 the property was beyond the reach of his family. I do not therefore conclude that the claimants have failed to mitigate their loss.
46. Miss Schuman, on behalf of the claimants, seeks further to persuade me that damages for distress and inconvenience are recoverable arising from the particular circumstances of failed application under the first right-to-buy. She accepts that in the authorities such damages are not generally recoverable in respect of a failed conveyancing transaction in respect of residential property. This transaction, however, was as part of its purpose intended to be therapeutic for the family as a whole following Paula’s death. This was known to Mr Desai. The family were of course at all times residents in the house. The object of the transaction was to transfer ownership to them. I have no doubt the fact of ownership would itself bring comfort to the members of the family following their bereavement and especially to Beverley, but I am unable to conclude that the transfer of ownership comes within the category of a contract “whose very object is to provide pleasure, relaxation, peace of mind or freedom from molestation”. See Smith and Another v Hewier & Co (A Firm)(?) Northern Ireland Law Reports [1992] 236 at page 245.
47. All purchases of private property to some degree provide the satisfaction of ownership and hopefully the prospect of quiet enjoyment and the pursuit of happy family life in many cases. That was the hope to a much higher degree than would normally be the case for these claimants in this instance, but that does not in my judgment move the transaction into a different category from the ordinary residential conveyance as was, for example, the case in Farley v Skinner [2002] Appeal Cases 732 where a specific survey was carried out for aircraft noise.
48. I am not, therefore, able to accept that general damages are recoverable for this breach of contract. Accordingly, there will be judgment for the claimant in the sum of ,£128,000.
