The Court of Appeal has upheld an award of only £250 in damages for the defendant solicitors' failure to identify a relevant planning restriction affecting a residential property purchased by the claimants, where that was the cost of the claimants' successful application to remove the restriction: Bacciottini & Anor v Gotelee and Goldsmith (A Firm) [2016] EWCA Civ 170.

The decision emphasises that the so-called "breach date rule" is just a starting point, and the assessment of damages in any given case is to be conducted realistically and not mechanistically. Where a claimant has successfully taken steps to mitigate its loss after the date of breach, so that no loss has in fact been suffered, that will be highly relevant.

Herbert Smith Freehills acted for the defendant, who was successful both at first instance and on appeal. Graeme Robertson, a senior associate in our disputes team who acted in the case, gives further details below.

Background

The claimants instructed the defendant solicitors to act on their purchase of a residential property for £600,000. The defendant failed to advise the claimants of a planning restriction which meant they could not use the property for residential purposes.

The claimants subsequently instructed different solicitors who identified the restriction and recommended that the claimants apply to have it removed. The claimants lodged a £250 application to remove the restriction, which was successful.

The claimants brought an action against the defendant for negligence. They claimed damages of £100,000 plus interest, which they said represented the diminution in value of the property at the time of purchase caused by the restriction. The defendant admitted negligence but argued that having to make the £250 application to remove the restriction was the only loss suffered by the claimants. The High Court agreed. It awarded the claimants only £250 and ordered them to pay the majority of the defendant's costs.

Decision

The Court of Appeal dismissed the appeal, with Lord Justice Davis giving the leading judgment (with which Lloyd Jones and Underhill LJJ agreed). Davis LJ remarked that "there is rather less to this case than possibly first meets the eye". He succinctly summarised the basis for the court's decision, saying:

"By reason of the subsequent removal of the restriction the [claimants] have suffered no loss and there is nothing in respect of which they require to be compensated. That is the nub of it."

The Court of Appeal rejected the claimants' argument that the loss was "fixed" at the date of purchase of the property. The claimants sought to rely on the principle in Philips v Ward [1956] 1 WLR 471, that damages will normally be assessed at the date when the damage occurs, which is usually the same day as the cause of action arises – sometimes referred to as the "breach date rule". In the present case, however, the Court of Appeal said that the principle is Philips v Ward is no more than a "convenient starting point". The assessment of damages is to be undertaken realistically and not mechanistically.

In the present case, it was necessary to consider the act of mitigation conducted by the claimants following the purchase (successfully applying to have the restriction removed). Davis LJ held that the claimants were under an obligation to mitigate their loss in this way. Making such an application was not equivalent to having to engage in lengthy, costly and uncertain litigation. In any event, whether or not the claimants were under an obligation to mitigate in this way, they did, and therefore avoided their potential loss.

Davis LJ was also not impressed by the claimants' argument that they could have purchased the property at a lower price had they known about the restriction, subsequently removed the restriction and sold the property at a profit. The likelihood of success in making an application to remove the restriction was high, even at the time of purchase, so the diminution in value of the property would have been negligible. Irrespective of this, there was no firm evidence that the claimants would have tried to purchase and sell the property in this way, and no evidence at all as to what stance the vendors would have taken.