Tag Archives: Solicitors’ Negligence

Solicitors’ application to Land Registry was negligent misstatement

What follows is a cautionary tale.

In Chief Land Registrar v Caffrey & Co [2016] clients sent their solicitors a Form DS1 Land Registry discharge purportedly signed on behalf of their bank to discharge a mortgage.

It was a forgery.

The clients told the solicitors that the bank was represented by another firm of solicitors, but that was untrue too.

The solicitors did not contact the bank or the so-called bank’s solicitors to verify the DS1 or that the “bank’s solicitors” were actually instructed on it. They submitted the Form DS1 to the Land Registry with a Form AP1 to apply to delete the mortgage.

The Land Registry asked for evidence that the person signing the DS1 had authority to do so on behalf of the bank.

The client supplied the solicitors with a purported power of attorney seemingly appointing four individuals, including the apparent signatory to the Form DS1, as the bank’s attorneys.

The solicitors sent a certified copy of the purported power to the Land Registry. The Land Registry acted on the application, the copy power and the Form DS1, and removed the mortgage from the property’s land register.

Later Santander UK plc lent money on the security of a charge on the property.

When the original Bank discovered that it’s mortgage had been removed, it applied to reinstate it to the register, but Santander objected. A Land Registry adjudicator decided that the original bank’s mortgage should be reinstated, but ranked it after Santander’s mortgage. The original bank then sought and obtained an indemnity for it’s loss from the Land Registry. The Land Registry then sued the solicitors to recoup their outlay under that indemnity.

The first basis of claim was negligence for having assumed a duty of care to the bank and then having breached it. The Land Registry claimed to be subrogated, by Land Registration Act 2002, s 103, Schedule 8, paragraph 10, to that claim of the bank against the solicitors.

But the High Court Master pointed out that the solicitor was acting for the borrowers in the discharge of the bank’s mortgage, and not for the bank, which had conflicting interests. The solicitors had been told that the bank had its own solicitors and so had no reason:
– to think that the bank was relying on it in any way,
– to disclaim any duty towards the bank or,
– to advise it to take its own advice.
Nor was the bank unsophisticated.

The solicitors were never asked to act on behalf of the bank, and never thought they were doing so. They thought that the bank was independently advised. The solicitors were acting for the borrowers, not the bank. The borrowers were not giving instructions to the solicitors on behalf of the bank, but on their own behalf.

The actual act which caused the loss was the act of the Land Registry in removing the charge, not the act of the solicitors in supplying the information to the Land Registry. Facilitating the causing of harm by another person was only grounds for negligence liability in exceptional cases e.g. where someone supplies a dangerous object to, or creates a dangerous situation for, someone else who is known to be irresponsible, or where someone’s job is to take reasonable care to prevent someone else’s actions.

“A solicitor asked to do something for his or her client and against the interests of another person is necessarily doing something capable of harming the other person. If it is done carelessly, it may harm that person even more. But that hardly militates for imposing a duty of care.

The solicitors were responsible for submitting the documents to the Land Registry without making checks. But that is what they were asked to do and their clients could have complained had they not done that. That contractual duty was undertaken to the clients alone.

“The act (of submitting the documents without first making checks) would have been easy to avoid, but at the price of not acting for the clients, or at any rate of greater expense to the clients. Moreover, the bank also has another remedy, i.e. against the [Land Registry].”

Registered land was known to property lawyers and to others, at that time, to be insufficiently secure against that kind of fraud. That was not the solicitors’ fault. The real question was how the law should allocate the risks of such fraudulent activity.

The Land Registry claimed to be subrogated to the rights of the bank. So the issue was to be determined as between the bank and the solicitors. The solicitors had not designed or run the system and it was not fair just or reasonable to make the solicitors responsible to the bank for the risk of fraud within an inherently risky Land Registration system. So the claim failed so far as it was based on negligence.

The Land Registry’s second basis for claim was negligent misstatement i.e. that by completing and/or submitting the application to the Land Registry and/or certifying a copy of the purported power of attorney and/or supplying it to the Registry, the solicitors “expressly or impliedly represented to the Land Registry that they had taken sufficient steps or measures and/or knew of sufficient facts to satisfy [themselves] that” the discharge form had been properly executed, solicitors had been instructed, the power of attorney was valid, the bank wished to discharge the charge, and that the property was no longer charged in favour of the bank.

The Land Registry said that the relationship between the solicitors and the Land Registry was such that the solicitors “knew or ought to have known that the Land Registry would rely upon” those representations in dealing with the application to discharge the bank’s charge, and so “the [solicitors] owed to the [Land Registry] a duty to take reasonable care to ensure that the [representations] were true.” The Land Registry said the representations were false, that it had relied on them and that it had thereby been caused loss.

Unlike the first negligence ground where the Land Registry claimed to be subrogated to the rights of the bank, and the question therefore arose as between the bank and the solicitors, here the issues arose directly between the Land Registry and the solicitors.

The Land Registry had professional staff who might be expected to have systems for checking matters themselves. They did not just blindly accept whatever the solicitors told them.

However the High Court Master was narrowly persuaded that, on the peculiar facts of this case, the solicitors had assumed a duty to take care in the representations which they had made to the Land Registry.

So the Master gave default judgment to the Land Registry, on the second cause of action, for damages to be assessed.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Removal of planning condition abolished claimants’ loss

In the Court of Appeal case of Bacciottini & Anor v Gotelee and Goldsmith (A Firm) [2016], the appellants had acquired a residential property in May 2007. The respondent solicitors had negligently failed to advise them that there was a planning restriction attached to the property restricting it’s residential use. Later, after the purchase had been concluded, the appellants successfully secured the removal of the planning restriction.

The appellants claimed the sum of £100,000 (with interest) being the difference between the value of the property in May 2007 without the planning restriction and the value of the property at that date with the planning restriction.

But the trial Judge merely awarded the appellants damages of £250, being the cost of the application to the local authority to remove the planning restriction.

Dismissing the appellants’ appeal, the Court of Appeal said the measure of damages ordinarily is:

“….that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been if he had not sustained the wrong for which he is now getting his compensation or reparation.”

(Lord Blackburn in Livingstone v Rawyards Coal Co.(1880)).

The Court of Appeal in Bacciottini said the core principle set out in Livingstone v Rawyards Coal Co. (cited above) would determine the outcome of the appeal.

In The New Flamenco [2015] Longmore LJ of the Court of Appeal had said:

“The important principle which emerges from these citations is that, if a claimant adopts by way of mitigation a measure which arises out of the consequences of the breach and is in the ordinary course of business and such measure benefits the claimant, that benefit is normally to be brought into account in assessing the claimant’s loss unless the measure is wholly independent of the relationship of the claimant and the defendant. That should be a principle sufficient to guide the decision of the fact-finder in any particular case.”

Mr Bacciottini and Ms Cook had had no realistic option but to make an application for the planning condition to be lifted by way of mitigation. That was the course that any sensible owner and occupier in their position would have taken.

So the act of mitigation, in applying to the council to get the restriction removed, which generated the benefit, “arose out of or was sufficiently connected with [the solicitors’] breach [of duty to the appellants as] to require [it] to be brought into account in assessing damages.” (Mance J in The Fanis [1994].)

By reason of the subsequent removal of the restriction the appellants had suffered no loss and there was nothing in respect of which they could require to be compensated.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Solicitor should have disclosed price discrepancy to lender

In the Court of Appeal case of Mortgage Express Ltd v Bowerman & Partners [1996] Millett LJ said;

“…..A solicitor who acts for [buyer and lender in] a transaction owes a duty of confidentiality to each client, but the existence of this duty does not affect his duty to act in the best interests of the other client. All information supplied by a client to his solicitor is confidential and may be disclosed only with the consent, express or implied, of his client. There is, therefore, an obvious potentiality for conflict between the solicitor’s duty of confidentiality to the buyer and his duty to act in the best interests of the mortgage lender.”

No such conflict was found by the court to exist:

“It is the duty of a solicitor acting for a purchaser to investigate the vendor’s title on his behalf and to deduce it to the [lender’s] solicitor. He has the implied authority of his client to communicate all documents of title to the [lender’s] solicitor. In the present case, the information in question appeared on the face of the vendor’s title, which consisted of his agreement, subject to contract, to purchase the flat for £150,000. Had the [lender] instructed other solicitors, [the borrower’s solicitor] would have had to provide them with a copy of that agreement. It would then have been for those solicitors to consider whether they ought to inform their client of the price which [the borrower] was paying for the flat. In the present case [the borrower’s solicitor] was instructed to act both for the buyer and the [lender] and it was his duty to investigate the vendor’s title on behalf of each of his clients. He must, therefore, be taken to have been in possession of the documents of title, including [the vendor’s] purchase agreement, not only as solicitor for [the borrower] but also, with [the borrower’s] implied authority, as solicitor for the [lender]. He then came under a duty to the [lender] to consider whether he ought to disclose the information which that documentation contained to them.”

In the Court of Appeal case of Goldsmith Williams Solicitors v E.Surv Ltd [2015] the court said that the question whether the Solicitors were under the Bowerman duty in the present case depended on whether that duty was excluded by, or was inconsistent with, the terms of the solicitors’ engagement, as contained in the Council of Mortgage Lender’s (CML’s) Handbook.

On the contrary Clause 5.1.2 of Part 1 of the CML Handbook could only be explained on the basis that if:

1. a matter “comes to the attention of the solicitor dealing with the transaction which [the solicitor] should reasonably expect [the Lender] to consider important in deciding whether or not to lend to the borrower” and

2. that matter is not confidential to the borrower

then the solicitor should report it to the lender.

One of the matters then included under Rule 6(3)(c) of the Law Society’s Practice Rules 1990 as being a solicitor’s obligation to the lender was “making appropriate searches relating to the property in public registers … and reporting any results … which the solicitor considers may adversely affect the lender”.

A search of the Land Registry in this case was a search for the purposes of that sub paragraph and had resulted in the information that the property had been purchased recently at a lower price which strongly suggested that the current valuation was excessive. The search in this case had obviously been relevant to the value of the proposed security and the information should have been reported to the lender.

However the solicitors’ appeal was successful. Even if they had provided the information they should have on the purchase price and date of purchase of the property, it had not been proved on the balance of probabilities that the lender would have reacted to the information. This was because on their mortgage application the borrower had provided price history information which was not materially different.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Time limits in negligence cases: appellants had insufficient actual or constructive knowledge to trigger limitation period

In a claim for damages for negligence the right to sue accrues at the date that damage occurs, even if no-one knows about the damage at the time.

To stop the limitation period for suing running prematurely section 14A of the Limitation Act 1980 disapplies the more general time limit in section 2 of the Limitation Act 1980 and provides for two alternative periods of limitation – 6 years from the date on which the right to sue accrued or 3 years from “the starting date” which is defined in subsection (5).

Section 14A only applies to claims in negligence and has no application to claims for nuisance, misrepresentation. or breach of statutory duty.

Section 14A (5) of the Limitation Act 1980 requires that the starting date is the earliest date on which the claimant had both:

1. the knowledge required for bringing an action for damages in respect of the relevant damage and

2. the knowledge required of their right to bring such an action.

Section 14A(6)(a) then says that “the knowledge required for bringing an action for damages in respect of the relevant damage” includes knowledge of “the material facts about the damage in respect of which damages are claimed”.

Section 14A(7) says “the material facts about the damage” are such facts about the damage as would lead a reasonable victim of such damage to think it serious enough to justify his starting proceedings for damages against a defendant who did not dispute liability and could satisfy a judgment.

In the Court of Appeal case of Blakemores LDP v Scott & Anor [2015] the trial judge had thought that the relevant “damage” for the purposes of section 14A(5)-(7) was the respondent law firm’s failure, in April 2009, to file an objection to the registration of two Land Registry titles affecting a village before the procedural deadline.

The appellants, Ms Carole Scott (“Ms Scott”), Mr Eric Walker (“Mr Walker”) and Mr Christopher Balchin, were villagers. Ms Scott alone knew that the law firm had been negligent in failing to file the objection, but even Ms Scott did not know the consequences of that failure.

So an issue was whether merely knowing that the firm had been negligent in not advising that the objection should be filed before the deadline was enough to lead a reasonable person to consider it sufficiently serious to justify his instituting proceedings for damages against the law firm, assuming it to be solvent and unwilling to dispute liability.

The court said knowing the firm’s failure to file the objection before the deadline was insufficient knowledge of a “material fact about the damage” to start time running for the purposes of sections 14A(6)(a) and (7).

The appellants needed to know that the effect of the failure to file the objection was to allow the Land Registry Adjudicator to make a discretionary decision against them in relation to a title.

There were two reasons why the material fact about the damage could not just be the negligent advice or the failure to file the objection before the deadline:

1. the appellants were not experts in land registration or manorial law. They could not be taken to have known the arcane consequences of a failure to file an objection in time without being told what they were.

The consequences of the non-filing of the objection by the deadline were “a fact only ascertainable with the help of expert advice” but the last part of section 14A(10) of the Limitation Act 1980 did not mean that they should “be taken … to have [“extended constructive”] knowledge of [that] fact” because Ms Scott and Mr Walker had in April 2009 and before, taken reasonable steps to obtain expert legal advice.

2. The relevant material facts about the damage have to be such as would lead a reasonable person to consider it sufficiently serious to justify his instituting proceedings for damages against a solvent firm, not disputing liability. On the evidence Ms Scott may not have known anything that would have led a reasonable person to sue:

– she had no reason to think she would be worse off. She understood that the costs were to be covered by the law firm and not reclaimed from her

– she had reason to think the case was going to be successful, and

– most crucially she seemed unaware that the firm’s negligence had turned a clear right to have the title closed into a matter for the discretion of the adjudicator.

So the starting date for limitation purposes was not April 2009 when the failure to object occurred. A trial of the facts would be needed before that date could be properly decided.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Losses of solicitor’s negligence largely cancelled by buyers’ damage reduction work

In a legal transaction a solicitor should advise the client on all information, that the solicitor should have gleaned from due diligence, that might have a bearing on the price the client is paying for the property.

This is to give the client the opportunity to pull out or renegotiate the price if there is anything untoward that the solicitor should have found out about.

In Bacciottini & Anor v Goldsmith [2014] the property had been a barn attached to a hall.

The 1974 planning permission for conversion of the barn to a dwelling contained a condition that “the converted barn shall be used only as ancillary accommodation solely in conjunction with the occupation of Snape Hall as a single private dwelling.”

The solicitor who dealt with a later £575,000 purchase of the property failed to tell the buyers about the restriction.

Without the restriction the property was in fact then worth only about £550,000. With the restriction it was only worth £450,000.

That the court found it worth as much as that may seem strange. Now owned separately from the Hall the condition precluded it being lawfully occupied as a dwelling since it could no longer be occupied as part of the Hall as the condition required.

The High Court accepted that the solicitors had breached their duty in failing to provide the information that would have enabled the buyers to renegotiate the price before committing themselves to the purchase. Indeed the solicitors accepted this too.

However the court was far from convinced that the negotiations would have got the price down to anywhere near £450,000 not least because getting the restriction lifted was a relatively simple matter. In fact after discovering it the buyers had no choice but to do this. For one thing they had a legal duty to try and reduce or mitigate their loss and applying to get the restriction lifted was part and parcel of that duty.

Their application to lift the condition had been successful in November 2009. Nearly all the loss they had suffered had been eradicated by that mitigation.

The court agreed with the defendant solicitors that the buyers’ actual loss was a mere £250 and awarded that as damages.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Court draws line under property solicitor’s liability

In deciding whether a law firm has been negligent towards a property client the court must decide what was the scope of the law firm’s engagement?

Secondly if the engagement covered the relevant service was the law firm negligent in its performance of that service?

Thirdly, if the law firm was in negligent breach was that breach the cause of the claimant’s loss?

Fourthly even if the law firm is on the hook for the above the claimant must not rack up unnecessary additional losses by acting unreasonably in the mistaken belief that the solicitor or his insurers will simply foot the bill.

In the High Court case of Rentokil Initial 1927 Plc v Goodman Derrick Llp [2014] Taylor Wimpey had taken a strong line over the terms of a planning condition when negotiating a conditional purchase agreement for the claimant’s property.

The claimant said the respondent’s negotiation of that clause had left Taylor Wimpey too much latitude to reject the planning permission obtained on the grounds of excessive infrastructure agreement costs when the claimant had been led to believe that the only infrastructure agreement costs to be taken into account were those under the Section 106 Agreement.

The court accepted that the reference to Section 106 Agreement costs was fairly standard short hand embracing all the infrastructure agreement costs associated with the planning stage.

The court also accepted that the respondent’s engagement was limited to advising on the legal issues that did or might arise from the terms of the contract, and not on the planning or commercial issues that did or might arise from it.

Here the planning issues had been devolved to a firm of planning consultants retained by the claimant and the claimant was itself commercially very experienced and sophisticated. Indeed one of the main contacts there was himself a solicitor. Both the planning consultant and the claimant had been kept copied in and informed during the negotiation stage.

The court found the respondent solicitors’ draftsmanship and advice adequate.

The court also accepted that the draftsmanship and advice had not caused any loss because it was generally known that Taylor Wimpey would not have agreed to any different terms and the claimant exchanged contracts with them with that knowledge.

In fact the conditions, imposed by the planning permission, that Taylor Wimpey were using the contract to rail against were to be expected in the circumstances and not such as to prevent the sale from proceeding. Indeed the claimant would have won its case had the issue gone to arbitration under the contract as it should have done.

Given the state of the property market in 2008 and Taylor Wimpey’s financial position it had been inevitable that Taylor Wimpey would have sought to “chip” the original contract price.

In any event the amount of the reduction the claimant had agreed to induce Taylor Wimpey to complete the purchase was too great and reflected an excessive anxiety to get the property off its hands to Taylor Wimpey.

So the claim was not surprisingly dismissed.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Salaried partner not liable to property clients

Section 14 of the Partnership Act 1890 provides for a person to be liable as a partner where:

First, the person in question has been held out as a partner in a firm; and,

Secondly, two further sub-elements have been complied with:

A the claimant must have “given credit” to the firm; and,

B such “credit” must have been “given” in reliance upon (“upon the faith of”) the representation that the defendant was a partner.

In Nationwide Building Society v Lewis [1998] the Court of Appeal said ‘given credit’ was not to be construed restrictively and could apply to ‘any transaction of the firm’.

There is no presumption of reliance in favour of a claimant. The claimant must prove, in every case, that in entering into the contract for legal services with the relevant firm, they had, in some way, relied upon the fact that the headed paper, or other representation, held the employee out as a partner of the firm.

As the High Court said in Sangster v Biddulph [2005] the claimant must satisfy the court that, on the balance of probabilities, the holding out or representation had a material influence on the claimant’s decision to proceed with the proposed transaction through those solicitors.

The holding out or reliance does not need to have had a decisive effect but it must have been a contributing causative factor in the claimant’s decision to use the firm.

In Walsh & Ors v Needleman Treon (A Firm) & Ors [2014] the claimants claimed against Mr N and Mr T, the equity partners of the firm, under an agreement whereby the firm was to act for the claimants in short term bridging finance transactions protected by legal charges over properties.

Thc claimants sought to establish liability, also, against a Mr Prior who resisted this on the basis that, as a “salaried partner”, he was an employee of the firm, albeit also the head of the firm’s property department and held out a “partner” on the firm’s letterhead.

The High Court said the claim did not begin to make out a case of material reliance by the claimants on any holding out of Mr Prior as a partner.

There had been nothing to suggest that any of the claimants would, or might, have done anything differently had Mr Prior not been held out as a partner.

Even when one of the claimants began to become concerned about the prospects of repayment, the most that could be said was that that claimant had felt reassured because of Mr Prior’s specialist skills and seniority- nothing necessarily to do with his status, or otherwise, as a partner.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Actual Architect’s Certificates came too late to protect buyers

Reliance must follow representation and cannot be retrospective to the transaction it induces the buyer to enter into.

Where a seller indicates that an Architect’s Certificate is in existence (when it is not) or that it will be forthcoming after completion of the sale and, in either event, the Certificate does come forward but only after exchange of contracts and completion the buyer may have problems relying on it as the following case indicates.

In Hunt & Ors v Optima (Cambridge) Ltd & Ors [2014] Optima (Cambridge) Ltd (“Optima”) built 2 blocks of flats at Jubilee Mansions, Peterborough. Strutt & Parker (“S & P”) were retained by them to carry out inspections in the course of development and produce “Architects Certificates” in respect of the flats for the benefit of the purchasers and their lenders.

Before exchange of contracts the purchasers were told that they would receive Certificates on completion.

S & P carried out some ten inspections of the works, producing to Optima Certificates as to the relevant stages of construction of the flats.

S & P also provided Certificates to the purchasers attesting to the satisfactory construction of the flats.

The building works were carried out badly and the inspections were negligent.

Eight of the purchasers sued Optima and S & P.

In the case of two of the claimants the Certificate was executed before the date of the sale agreement between them and Optima. S & P accepted liability to them.

In respect of six other claimants (“the claimants”), the Certificate was not provided until after, and perhaps long after, the exchange of contracts and completion of the relevant flat lease.

The procedure for the claimants other than claimants 7 and 8 – Mr & Mrs Peace – was for S & P to send the Certificates (in draft or as completed) to Optima’s solicitors (“Irena Spence”) – who then submitted them to the claimants’ solicitors’ firms.

Was the fact that the Certificates had been received by the claimants after contract and completion an obstacle to the recovery by them of damages from S & P?

Exceptionally Mr and Mrs Peace, were not the original purchasers from Optima. The original purchaser of their flat – flat 17 – was Chantal Smith whose lease was dated 2003. She sold the lease to them in 2006.

The negligent statements relied on were the statements contained in the signed Certificate eventually provided to the relevant claimant. But the claimants could not have relied on those statements in committing themselves to their purchase contracts because those statements did not then exist.

At most they could be said to have relied on an understanding either (i) that there was a Certificate already in place; or (ii) that they would receive a Certificate on or after completion.

An indication of the form that a statement would take when issued fell far short of the representation the claimants needed to demonstrate i.e that a Certificate could be relied on before it was issued.

In fact only claimants 5 and 6 had any form of indication that S & P was in a position to sign a Certificate, as opposed to a mere indication of what would be the form of any Certificate once signed.

Those considerations applied even more forcefully to Mr and Mrs Peace, the 7th and 8th claimants. Before they bought they were not told that an Architect’s Certificate had been or would be issued nor were they provided with any draft.

They received a Certificate nearly 3 years after they completed their purchase. This was the first time they knew anything of S & P and the work they had carried out. All that they got pre-contract and completion was the seller’s inaccurate “yes” answer to the question whether there were any guarantees or insurance policies of three specified types.

For the claimants, other than Mr and Mrs Peace, one straw they could clutch at would be afforded by construing the Certificate, as a form of warranty, which would require an intention to create contractual relations.

Those of the claimants’ solicitors who told their clients that the Certificate was like a guarantee were adopting this line of reasoning.

However, the Certificate was not any form of warranty. The Certificate was described as such; and not as a promise, warranty or guarantee. It contained no reference to any consideration. Although it was to be relied upon by subsequent purchasers, and those lending to them, there was no reference to any possible assignment of the “Architect’s” obligations.

The document certified that various things had happened and gave various conclusions as to the state of completion of the property and the standard of its construction.

Clause 5 said “I am aware that this Certificate is being relied upon…”. However this was no more than was to be expected of a document which the maker intended to be relied on so as to give rise to a potential liability in negligent misstatement. Those words would have been unnecessary if there was to be contractual liability under a warranty anyway. So also was the confirmation in clause 7 that the certifier had appropriate experience.

The Certificate was not written akin to a contract or “on its face” a warranty.

It ought to be considered how the Certificate would be viewed by a reasonable person with the level of knowledge he could be expected to have. As people buy land with legal assistance, how would the document appear to someone who knew how a warranty contract was distinctly different?

So the judge lower down was wrong to find that the claimants were entitled to succeed based on a negligent misstatement or collateral warranty. So the Court of Appeal allowed the appeal and dismissed the claimants’ claims.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

No prospects of planning so negligence did not cause application expense losses

Where a claim for breach of contract is successful, the first set of principles concerns the date of assessment of damages:

1. The overriding principle is that contractual damages are compensatory. The damages should represent the value of the contractual benefit the claimant has been deprived of by the breach of contract.

2. Prima facie damages are to be assessed as at the date of breach without regard to later events.

3. You can depart from that rule where it is necessary to ensure that the claimant is not over-compensated or under-compensated having regard to events which have occurred since the date of breach, in particular where matters which were contingencies at the date of breach have become faits accomplis later.

4. Where this is necessary, one way of departing from the rule is to assess the damages as at a later date. Another approach is to assess damages as at the date of breach, but in the light of later events.

In claims for professional negligence against solicitors and barristers where the lawyer’s negligence has resulted in their client losing the chance to bring a claim against a third party, a second set of principles apply to the quantification of damages. Here, the court must value the chance which has been lost. That means the court must assess the client’s prospects of success. If the underlying claim was certain to fail anyway, it will have had no value and the claimant will have no loss as a result of the lawyer’s negligence.

In Ridgewood Properties Group Ltd & Anor v Kilpatrick Stockton Llp & Ors [2014] the First Claimant (“RPG”) entered into a series of 9 contracts with Texaco Ltd (in its then and later names) (“Texaco”), known as the Airspace Agreements. Here RPG acquired conditional options to buy sites used by Texaco that were or included petrol filling station shops. RPG would apply for planning permission for redevelopment to become a shop with flats above. On planning permission, RPG would take a building lease of the site and carry out the development, and then, RPG would either acquire the freehold or a long lease of the site, subject to Texaco retaining the shop.

In apparent repudiatory breach of the options Texaco sold the 9 sites, to Somerfield Stores Ltd (“Somerfield”) and Azure Properties LLP (“Azure”), without reserving to RPG the power to compel Somerfield or Azure to perform Texaco’s obligations to RPG under the Airspace Agreements.

RPG claimed that their solicitors had negligently failed to advise RPG about their right to terminate the Airspace Agreements prior to March 2006. RPG said that, if the solicitors had advised that Texaco’s apparent repudiatory breach of the Airspace Agreements enabled RPG to terminate the Agreements and claim damages for loss of opportunity to perform them, RPG would have done so, and would not have continued to seek planning permissions.

The court concluded that irrespective of any repudiation of the Agreements by Texaco, RPG had never had a real prospect of successfully obtaining the planning permissions anyway, so any claim for wasted costs would fail. Going ahead with something which (independently of any Texaco breach or solicitor’s negligence) they had no chance of getting had broken the causal link between any Texaco breach of contract/solicitor’s negligence and their loss incurred in wasting expenditure on planning applications: as that loss was always bound to occur if they went ahead with applications which had no prospects of success – regardless of the status of the Airspace Agreements.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Property buyer bore restrictive covenant losses incurred after ignoring solicitor’s belated advice

In Darby & Darby (A Firm) v Joyce [2014] Mrs Joyce bought a house subject to covenants “Not to make any alteration or addition to the exterior or external appearance of the Property [Tamarisk] or the buildings thereon nor to erect any walls, fences or buildings (whether temporary or otherwise) without first obtaining the written consent of the Transferor [the Hoyles]”

Darby & Darby solicitors did not advise her, during their handling of her purchase, as to the existence of the covenants and she began internal and external alterations. Only when the Hoyles had indicated the imminence of injunction proceedings the following December did Darby and Darby tell Mrs Joyce to stop work.

Mrs Joyce ignored the advice suspending work only on the patio causing further wasted expense and her having to pay the costs of injunction proceedings.

Darby and Darby denied liability for those further expenses and costs.

The Court of Appeal agreed.

Whilst Mr Darby had not previously given comprehensive advice as to the effect of the covenants, she had understood the advice he had given her on 10 January. She was being advised to stop work and settle or else face litigation. Albeit he should have sent her away to get independent advice, the advice was good. She elected to reject it. So she was the cause of the injunction proceedings and, their costs.

So the Court of Appeal upheld the solicitors’ appeal against the lower court’s order that they compensate for those further expenses and additional costs.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.