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Causation and mitigation of loss in conveyancing solicitors’ professional negligence

A review of (1) Michele Raffaello Bacciottini, (2) Rosemary Anne Cook v Gotelee & Goldsmith (a firm) (2014) Ch D

The recent decision of (1) Michele Raffaello Bacciottini, (2) Rosemary Anne Cook v Gotelee & Goldsmith (a firm) (2014) Ch D is a good illustration that, in cases involving allegations of professional negligence against solicitors, courts will uphold the Claimant’s duties to mitigate their alleged losses resulting in a significant reduction in the damages awarded. In this article we provide a description of the case and comment on its implications.

Facts

In early 2007, the Defendant firm acted for the Claimants in the purchase of a property consisting of a two bedroom cottage converted from a granary, a timber-framed barn, a brick barn formerly used as a jam factory and 5 acres of land. The purchase price agreed was £575,000 and the Claimants planned to live in the property whilst developing it. The Defendant confirmed that it had carried out all the necessary searches on the property and that these had not revealed anything adverse. The Claimants therefore gave instructions to exchange contracts.

In fact, the Defendant had failed to identify that a 1974 grant of planning permission to convert the property included a prohibition on part of the property being occupied as a dwelling independently of another part of the property that had previously been sold separately  by the vendor.( “ the adverse planning condition”)  Unaware of this condition, the Claimants completed the purchase and moved in to the property.

Whilst preparing plans for development, the Claimants learned of the adverse planning condition and were advised by an architect to apply for it to be lifted before pursuing any other planning applications. They successfully applied in late 2009 and the condition was removed.

The Claimants brought a claim against the Defendant for failing to provide information about the adverse planning condition. They argued that, had they known of the condition prior to the exchange of contracts, they would either have purchased the property at a price reflecting its actual value or withdrawn from the transaction entirely. They claimed over £100,000 representing diminution in value of the Property as well as the additional stamp duty and mortgage interest paid as a result of the alleged overpayment. They argued that the application to remove the condition was triggered, but not caused by, the Defendant’s breach and therefore did not constitute mitigation of loss.    

The Defendant admitted liability. However, it argued that the negligence had not caused any loss beyond the cost of the application to remove the adverse planning condition. The Claimants’ application was part of their duty to mitigate. The Defendant also suggested that there was no causal link between the Defendant’s breach and the alleged loss. 

Findings

The Court found that whilst the Defendant’s breach had deprived the Claimants of the opportunity to make a fully informed decision and negotiate the purchase with knowledge of all the relevant facts, it did not follow that the breach had resulted in an overpayment.

It was thought to be more likely that, had the Claimants been made aware of the condition before exchanging contracts, they would have applied to have it lifted at that stage, rather than negotiate a lower price or walk away entirely. It was thought unlikely that they could have negotiated a significantly lower price bearing in mind that the application to remove the condition was easy and relatively inexpensive. As damages are compensatory by nature, then awarding the sum claimed as an overpayment would , on the facts of this case , over-compensate the Claimants.  

Further, the Court considered the application of the principles of mitigation and the need for a causal connection between the event said to constitute mitigation and the breach itself. The authorities distinguished between action or inaction caused by the wrongdoing (mitigation) and action or inaction triggered by the breach but resulting from an independent decision (not mitigation).

It was necessary to look at the individual facts and context to determine whether there was mitigation. In this instance, the decision to apply for the condition to be removed (which was the only viable option for the Claimants) was not independent of the Defendant’s negligence and did not arise separately as part of the Claimant’s development plans. As such, it was part of the Claimant’s duty to mitigate loss.

It was therefore found that the Defendant could only be liable for the cost of the application to remove the condition, this being £250, as the Claimant’s duty to mitigate had eradicated the loss alleged to result from overpayment.

Comment

The decision is a useful illustration that, given a particular set of facts ,courts will uphold and reinforce the Claimant’s duty to mitigate its losses . Application of this duty was especially valuable in this case, as it was one where the Defendant’s breach was clear and liability was admitted and yet alleged losses of over £100,000 were reduced to only £250.

The judgment also serves as something of a warning and reminder to such Claimants not only to behave reasonably and mitigate loss, but also to consider how such mitigation may affect the losses claimed in any subsequent litigation.

Contact

For further information please contact Philippa Bayes, Trainee Solicitor on 020 7220 5258.

By Philippa Bayes

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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