Solicitor’s negligence – Purchase of residential property – Defendant solicitor acting for claimants on purchase of house in terrace leading into garden square – Defendant advising that house benefiting from statutory right to use garden – Sale completed – Court subsequently holding that no right to use garden attaching to house – Whether defendant negligent in its advice – Whether claimants failing to mitigate loss by not accepting licence to use garden in return for payment – Claim allowed in part In 2008, the claimants purchased, for £6.8m, a house in Knightsbridge, London, that was located in a short terrace leading into a garden square. They instructed the defendant firm of solicitors to act for them on the transaction. The sales particulars for the property, and further information supplied by the vendors’ solicitor, indicated that there was access to the communal garden in the square but were unclear as to the legal basis of such access; there was reference to such access being provided “as a courtesy”. The defendant carried out its own enquiries and advised the claimants that they had a right to use the garden pursuant to the Kensington Improvement Act 1851, which governed the use and management of such squares. The defendant took the view that since the term “square” was defined in the Act to include a “terrace”, that indicated that properties on terraces that formed the “neck” to a square were clearly intended to enjoy the right to use gardens. Contracts were subsequently exchanged and the sale was completed. The claimants experienced difficulties in obtaining a key to the garden and instructed a different solicitor with regard to that issue. In correspondence, those responsible for managing the garden took the position that the claimants had no right to use the garden; however, they were prepared to grant a licence in return for a payment. In May 2009, they suggested a figure of £25,000 for a 50-year licence. The claimants did not accept that offer. They brought proceedings in which they argued that the refusal of a key was an actionable interference with their right to use the garden. The claim was dismissed in the High Court, which held that the claimants had no right to use the garden since the property was not one of the houses “in and encompassing” the square within the meaning of section 51 of the 1851 Act: see [2010] EWHC 1706 (Ch); [2010] PLSCS 190. The claimants brought a claim for damages against the defendant. They contended that the defendant had been negligent in failing to appreciate or advise the claimants of the risk that the 1851 Act did not extend to the property and in failing to inform them about the unsatisfactory nature of the information received from the vendors on that issue. Held: The claim was allowed in part. (1) Although the defendant could not be criticised for its view that the property was within the scope of the 1851 Act, it had not been entitled to regard the position as clear-cut. The Act was a difficult piece of legislation that contained no full definition of a “square”. The vendors’ solicitor had never claimed that the property benefited from rights under the 1851 Act; its responses to enquiries had used the word “courtesy” and it had been unable to answer queries about the legal position to the defendant’s satisfaction. In all the circumstances, the defendant should reasonably have concluded that there was at least a serious doubt as to whether the property fell within the Act. The defendant had been negligent in advising in unequivocal terms that the claimants would have the right to enter and use the garden. They should reasonably have warned the claimants that, as matters stood, there was scope for argument on that matter: Queen Elizabeth’s Grammar School Blackburn Ltd v Banks Wilson Solicitors [2001] EWCA Civ 1360; [2002] PNLR 14 applied. (2) On the evidence, the claimants would not have proceeded with the purchase of the property had they been properly advised on the situation with the garden. Aside from the importance that the claimants attached, on a personal level, to having the use of a garden, it was unlikely that they would have been prepared to proceed at a price that reflected the benefit of access to the garden had they been told that they might not have such access. (3) The claimants had, however, failed to mitigate their loss by not accepting a licence to use the garden in return for a payment of £25,000. The grant of such a licence would have alleviated to a great extent the disadvantage of falling outside the 1851 Act. The claimants would have been able to use the garden and to sell the property with the benefit of access to the garden. The £25,000 cost of the licence would have been a relatively small sum when compared to the likely uplift in value that it would confer on the property and to the price that the claimants had themselves paid for that property. It was also less than the costs that the claimants stood to incur in contested litigation. (4) Where a claimant failed to mitigate, it was not entitled to recover for more than the loss that it would have sustained had it done so. The award of damages should reflect all the costs that the claimants would have incurred had they mitigated by taking a licence. These included the £25,000 cost of a 50-year licence and the legal costs, estimated at £10,000, that the claimants would have incurred in securing that licence. A further sum of £65,000 should be awarded in respect of the difference in value between the property with a statutory right and its value with a 50-year licence. (5) The claimants were further entitled to their costs of instructing another solicitor to advise in relation to access to the garden up to May 2009. Following the changes to the rules on costs introduced by the introduction of the Civil Procedure Rules, it was no longer appropriate to restrict the claimants to such legal costs as would have been recoverable on the standard basis of taxation. The current position on a standard assessment, that the costs had to be proportionate to the matters in issue and therefore would not necessarily be recoverable even if shown to have been reasonably incurred, was not fully consistent with the principle that a claimant could recover for losses reasonably incurred when trying to mitigate. There was no sufficient public policy reason for continuing to restrict a claimant to standard costs in respect of its costs of mitigation: Dadourian Group International Inc v Simms [2007] EWHC 454 (Ch) applied; British Racing Drivers’ Club Ltd v Hextall Erskine & Co [1996] PNLR 523 not followed. In the instant case, the relevant costs should be paid on the indemnity basis. (6) Damages of £2,000 were also awarded for loss of amenity and disappointment. As a result of the defendant’s negligence, the claimants had not only suffered the disappointment of finding that they could not use the garden but had lost the chance to enjoy a garden elsewhere by buying a different property. The claimants’ non-pecuniary loss in that regard was distinct from the reduction in value in the property, which they would have sustained even if they had been buying solely as an investment. They had suffered the additional non-pecuniary loss because they were buying the property as a home. Jonathan Seitler QC and Benjamin Faulkner (instructed by Jones Day) appeared for the claimants; Michael Pooles QC and Paul Mitchell (instructed by Reynolds Porter Chamberlain LLP) appeared for the defendant. Sally Dobson, barrister
Solicitor’s negligence – Purchase of residential property – Defendant solicitor acting for claimants on purchase of house in terrace leading into garden square – Defendant advising that house benefiting from statutory right to use garden – Sale completed – Court subsequently holding that no right to use garden attaching to house – Whether defendant negligent in its advice – Whether claimants failing to mitigate loss by not accepting licence to use garden in return for payment – Claim allowed in part In 2008, the claimants purchased, for £6.8m, a house in Knightsbridge, London, that was located in a short terrace leading into a garden square. They instructed the defendant firm of solicitors to act for them on the transaction. The sales particulars for the property, and further information supplied by the vendors’ solicitor, indicated that there was access to the communal garden in the square but were unclear as to the legal basis of such access; there was reference to such access being provided “as a courtesy”. The defendant carried out its own enquiries and advised the claimants that they had a right to use the garden pursuant to the Kensington Improvement Act 1851, which governed the use and management of such squares. The defendant took the view that since the term “square” was defined in the Act to include a “terrace”, that indicated that properties on terraces that formed the “neck” to a square were clearly intended to enjoy the right to use gardens. Contracts were subsequently exchanged and the sale was completed. The claimants experienced difficulties in obtaining a key to the garden and instructed a different solicitor with regard to that issue. In correspondence, those responsible for managing the garden took the position that the claimants had no right to use the garden; however, they were prepared to grant a licence in return for a payment. In May 2009, they suggested a figure of £25,000 for a 50-year licence. The claimants did not accept that offer. They brought proceedings in which they argued that the refusal of a key was an actionable interference with their right to use the garden. The claim was dismissed in the High Court, which held that the claimants had no right to use the garden since the property was not one of the houses “in and encompassing” the square within the meaning of section 51 of the 1851 Act: see [2010] EWHC 1706 (Ch); [2010] PLSCS 190. The claimants brought a claim for damages against the defendant. They contended that the defendant had been negligent in failing to appreciate or advise the claimants of the risk that the 1851 Act did not extend to the property and in failing to inform them about the unsatisfactory nature of the information received from the vendors on that issue. Held: The claim was allowed in part. (1) Although the defendant could not be criticised for its view that the property was within the scope of the 1851 Act, it had not been entitled to regard the position as clear-cut. The Act was a difficult piece of legislation that contained no full definition of a “square”. The vendors’ solicitor had never claimed that the property benefited from rights under the 1851 Act; its responses to enquiries had used the word “courtesy” and it had been unable to answer queries about the legal position to the defendant’s satisfaction. In all the circumstances, the defendant should reasonably have concluded that there was at least a serious doubt as to whether the property fell within the Act. The defendant had been negligent in advising in unequivocal terms that the claimants would have the right to enter and use the garden. They should reasonably have warned the claimants that, as matters stood, there was scope for argument on that matter: Queen Elizabeth’s Grammar School Blackburn Ltd v Banks Wilson Solicitors [2001] EWCA Civ 1360; [2002] PNLR 14 applied. (2) On the evidence, the claimants would not have proceeded with the purchase of the property had they been properly advised on the situation with the garden. Aside from the importance that the claimants attached, on a personal level, to having the use of a garden, it was unlikely that they would have been prepared to proceed at a price that reflected the benefit of access to the garden had they been told that they might not have such access. (3) The claimants had, however, failed to mitigate their loss by not accepting a licence to use the garden in return for a payment of £25,000. The grant of such a licence would have alleviated to a great extent the disadvantage of falling outside the 1851 Act. The claimants would have been able to use the garden and to sell the property with the benefit of access to the garden. The £25,000 cost of the licence would have been a relatively small sum when compared to the likely uplift in value that it would confer on the property and to the price that the claimants had themselves paid for that property. It was also less than the costs that the claimants stood to incur in contested litigation. (4) Where a claimant failed to mitigate, it was not entitled to recover for more than the loss that it would have sustained had it done so. The award of damages should reflect all the costs that the claimants would have incurred had they mitigated by taking a licence. These included the £25,000 cost of a 50-year licence and the legal costs, estimated at £10,000, that the claimants would have incurred in securing that licence. A further sum of £65,000 should be awarded in respect of the difference in value between the property with a statutory right and its value with a 50-year licence. (5) The claimants were further entitled to their costs of instructing another solicitor to advise in relation to access to the garden up to May 2009. Following the changes to the rules on costs introduced by the introduction of the Civil Procedure Rules, it was no longer appropriate to restrict the claimants to such legal costs as would have been recoverable on the standard basis of taxation. The current position on a standard assessment, that the costs had to be proportionate to the matters in issue and therefore would not necessarily be recoverable even if shown to have been reasonably incurred, was not fully consistent with the principle that a claimant could recover for losses reasonably incurred when trying to mitigate. There was no sufficient public policy reason for continuing to restrict a claimant to standard costs in respect of its costs of mitigation: Dadourian Group International Inc v Simms [2007] EWHC 454 (Ch) applied; British Racing Drivers’ Club Ltd v Hextall Erskine & Co [1996] PNLR 523 not followed. In the instant case, the relevant costs should be paid on the indemnity basis. (6) Damages of £2,000 were also awarded for loss of amenity and disappointment. As a result of the defendant’s negligence, the claimants had not only suffered the disappointment of finding that they could not use the garden but had lost the chance to enjoy a garden elsewhere by buying a different property. The claimants’ non-pecuniary loss in that regard was distinct from the reduction in value in the property, which they would have sustained even if they had been buying solely as an investment. They had suffered the additional non-pecuniary loss because they were buying the property as a home. Jonathan Seitler QC and Benjamin Faulkner (instructed by Jones Day) appeared for the claimants; Michael Pooles QC and Paul Mitchell (instructed by Reynolds Porter Chamberlain LLP) appeared for the defendant. Sally Dobson, barrister