Plaintiffs purchasing property for letting as holiday flats – Property having planning permission for hotel only – Plaintiffs unable to afford costs of compliance after retrospective planning permission granted – Defendant solicitors admitting liability but disputing amount claimed for damages – High Court awarding £30,770 – Plaintiffs’ appeal allowed
The plaintiffs obtained the particulars of a property called Chatsworth in Woolacombe, Devon, which was described as “Chatsworth Holiday Flats”. They agreed to purchase the freehold of the property at the advertised price of £135,000, which comprised £128,000 for the property, £1,200 for fixtures and fittings and £5,000 for the goodwill. The contract was completed on January 29 1988 and the plaintiffs subsequently spent £55,000 refurbishing the property. For the first 18 months the plaintiffs used the flats for holiday lettings, and in the winter rented them out to seasonal staff.
In October 1989 the plaintiffs were informed by North Devon District Council that the planning permission attached only entitled them to use the property as an hotel and not for holiday letting. Retrospective planning permission was obtained for the use of the property as flats subject to, inter alia, the condition that they could only be occupied from March 15 to January 15 and, thus, the plaintiffs could not let the flats during the winter. The plaintiffs were also informed that they were to comply with building and fire service regulations, which would cost about £38,000. They traded until December 1993 and then, because they could not afford the costs of compliance with the regulations, sold the property for £140,000 in January 1994. The plaintiffs brought proceedings against the defendant solicitors alleging negligence, which the defendant admitted, but disputed the amount of damages claimed. It accepted liability for the cost of obtaining planning permission, and that the plaintiffs were entitled to recover the difference between the market value of the property at the time of the purchase, on the basis that it had planning permission for holiday flat use, agreed at £135,000, and the market value of the property at the time of purchase without planning permission. The judge refused the plaintiffs’ claim for loss of profits and ordered the defendant to pay the sum of £30,770. The plaintiffs appealed on the basis that the award was too low and the defendant cross-appealed contending it was too high.
Held The appeal was allowed and the cross-appeal was dismissed.
1.The claim for loss of profits was to be rejected because the defendant firm had not given a warranty as to the planning consent. The lost profits were not losses caused by entering the transaction since they would not have been earned, had the transaction not been entered into.
2. Damages were not to be assessed on the basis of the cost to the plaintiffs of extricating themselves from the transaction because they had never based their claim on that basis, and the evidence was not satisfactory for such calculations to be made. Therefore it was appropriate to calculate the market value of the property in January 1988 without planning permission, which was to be assessed as £99,000. Accordingly, damages were to be the diminution in value of £36,000 plus £1,480 in respect of the cost of obtaining planning permission: see Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191.
Christopher Gosland (instructed by Brewer Harding & Rowe, of Bideford) appeared for the appellants; Katherine McQuail (instructed by Lloyd Cooper) appeared for the respondent.
