Professional negligence – Causation – Quantum – Respondent instructing appellant firm of solicitors to act on purchase of residential property – Appellant failing to advise on existence of covenant against alterations and subsequently failing to secure necessary consent of neighbours to alteration works – Neighbours obtaining injunction requiring works to cease – Whether consequent loss caused by appellant’s negligence or respondent’s own failure to stop works – Appeal allowed in part
In March 2007, the respondent instructed the appellant firm of solicitors to act for her on the purchase of a residential property in Torquay for £460,000, funded in part by a mortgage loan. The respondent and her partner proposed to carry out alteration works to the property, including the installation of a pool in the garden, a balcony extension, a new patio area, terracing and landscaping. The appellant failed to advise the respondent that the property was affected by a restrictive covenant, contained in a 1985 conveyance, under which any external alterations required the prior written consent of the owners of the neighbouring property.
After completing the purchase, the respondent commenced the alteration works. In October 2007, the neighbouring owners made her aware of the restrictive covenant and threatened to apply for an injunction unless she immediately stopped work and sought their written permission. The respondent re-instructed the appellant to resolve the issue. Correspondence between the appellant and the neighbours over the following weeks failed to produce a solution. Meanwhile, the works continued.
Finally, in February 2008 the neighbours obtained an interim injunction requiring the works to stop. No agreement was ever reached with them regarding consent for the works. The company run by the respondent’s partner failed and, in summer 2009, the property was sold by the mortgage lender for £70,000 less than the respondent had paid for it.
The respondent succeeded in a claim against the appellant for negligence. The recorder held that the appellant had been negligent in failing to advise the respondent of the existence of the covenant and subsequently in failing to give clear advice regarding the enforceability of the covenant and the need for work to stop until consent was obtained. He further found that the respondent would not have purchased the property had she known of the covenant, that damages representing the difference in value between the property with and without the covenant would not adequately compensate her loss in circumstances where she had incurred costs on the works, mortgage payments, insurance premiums and her neighbours’ costs of the injunction proceedings and where she had made a loss on the resale of the property. He awarded a little over £186,000 in damages and further ordered an account of the cost of work carried out to the property, for which the appellant was also liable to pay.
The appellant appealed, contending that the recorder had erred on the issues of causation and quantum of damages. It relied on a visit that it had made to the respondent in January 2008, during which it had persuaded her to sign a written undertaking not to carry out any further works until agreement was reached; it submitted that it had made clear on that occasion that the respondent risked expensive litigation if she failed to stop work and that, by ignoring that advice, she had brought her losses on herself.
Held: The appeal was allowed in part.
(1) The judge had been entitled to find that the respondent would not have proceeded with the purchase of the property had she been advised of the existence of the covenant. The respondent was therefore entitled to damages representing the difference, if any, between the price that she had paid for the property and its actual value subject to the covenants at that time. The case was remitted to the recorder to assess that figure.
(2) The respondent was also entitled to recover the cost of the works that she had carried out to the property. That head of damages fell to be considered against the finding that, but for the appellant’s initial negligence, the respondent would not have purchased the property at all. She had in fact purchased the property and had incurred expense in carrying out works that, but for the appellant’s negligence, she would not have done at all. Those works had not enhanced the sale price and could therefore be regarded as wasted. Moreover, the respondent’s continuation of the works in 2007, after the initial objections from her neighbours, could not be regarded as a failure to mitigate her loss in circumstances where the appellant was not advising her to stop those works.
(3) The appellant should not have taken on the task of resolving the consent issue, since a potential conflict of interest arose owing to its own vulnerability to a negligence claim in relation to the original purchase. Once the problem had been explained to it in October 2007, it should have identified the potential conflict of interest with which the respondent’s further instructions presented it and should have referred her to other solicitors. Instead, it had discharged its retainer with a lack of professionalism and had failed, in 2007, to give clear advice to the respondent as to the nature and effect of the covenant or tell her that she should stop the works. However, on the evidence, the appellant had subsequently made it unambiguously clear to the respondent on its visit in January 2008 that all works had to stop pending the reaching of agreement with the neighbours. The respondent had been unwilling to stop work, despite the appellant’s unequivocal advice that the neighbours would sue her if she did not, and even though she must by then have understood why she was being so advised. The injunction proceedings, and in particular their costs, had been caused by the respondent’s obstinate rejection of the appellant’s advice. The appellant was therefore not liable for the financial consequences of the injunction proceedings and those costs, amounting to £23,296.86, should be deducted from the respondent’s damages award.
(4) Similarly, the appellant was not the cause of the matters that had led to the sale of the property at a loss in 2009. The appellant was not responsible for the collapse of the respondent’s partner’s company and the consequent difficulties in meeting the mortgage instalments. In all the circumstances, the £70,000 loss on the sale was not a loss of a nature for which the appellant had accepted responsibility.
(5) Nor was the appellant liable for the costs incurred by the respondent on mortgage payments and insurance during the period of her ownership of the property. There was no reason why the appellant should be expected to contribute to the cost of the respondent’s occupation of the property. She had no claim to be compensated for incurring expense which, if not incurred on her enjoyment of the occupation of that property, would probably have been incurred in relation to another property.
Bernard Livesey QC and Joshua Munro (instructed by Kennedys Law LLP, of Taunton) appeared for the appellant; Guy Adams (instructed by WBW Solicitors LLP, of Torquay) appeared for the respondent.
Sally Dobson, barrister
