Flattery v Newman & Maxwell (a firm) and others

In this case, the Chancery Division found that the Defendant firm had failed to exercise reasonable care in advising the Claimant on planning issues during the course of a conveyancing transaction. However, the Claimant was found to bear responsibility for two-thirds of the total recoverable loss of £232,150

The Facts

The Claimant, Mr Flattery (“Flattery”) operated a scrap metal yard in Canvey Island in March 2005. He decided to purchase a site marketed as a breakers yard in Nottinghamshire for £282,150. Flattery instructed the Mr Maxwell of the Defendant firm Newman & Maxwell (“N&M”) to handle the transaction on his behalf. Mr Maxwell had acted for Flattery on previous transactions, in particular in a matter where Flattery faced planning difficulties in relation to his operations at his Canvery Island site where Flattery planned to make an application to the local authority for a certificate of lawful use or development (“LDC”) under section 191 of the Town and Country Planning Act 1990. It transpired from the local search results obtained by N&M that the Nottinghamshire site had no planning permission for use as a breakers yard. Flattery obtained a number of documents from the seller which appeared to support the view that there had been such extended use of the property as a scrap yard that it had now become lawful. After completion of the transaction Flattery was unsuccessful in his application for an LDC of the site and without it the site had no practical and lawful use. Flattery subsequently entered into liquidation and the site was sold for £10,000.

It is Flattery’s case that N&M were in breach of their duty to advise him adequately about the critical planning issues and that he had suffered loss due to N&M’s negligence. Flattery pursued N&M for damages including the diminution in value of the site and expenses incurred before the true value of the property had been known to him. N&M denied these allegations and contended that Flattery was himself to blame and that he had at least contributed heavily to his misfortune, as he was aware of the planning issues. N&M sought to rely on the fact that Flattery obtained a letter, amongst other documents, from the planning authority from 1993 which stated that the ‘present established use’ of the property was that of ‘storage of scrap on the land without advertising’. Additionally, Flattery had met with an environmental officer from the local authority in May who noted that in order to obtain the necessary licence for a scrap yard Flattery would have to obtain planning permission or an LDC. Flattery failed to inform N&M about this conversation at the time of the transaction.

The Decision

The High Court had to consider whether or not N&M exercised reasonable skill and care in the advice it gave to Flattery in relation to the planning issues concerning the property. Englehart J found that N&M had failed to exercise reasonable skill and care in advising Flattery and found that N&M were liable to Flattery for his losses, However, the Court found that Flattery had heavily contributed to his losses and he therefore had to bear two thirds of the total recoverable losses himself.

Englehart J explained in his judgment that N&M should not have considered the letter from the local authority to be as good as an LDC and that in any event they failed to make clear to Flattery that the ‘established use’ was for ‘storage of scrap’ only. Englehart J found that N&M should have been cautious about the age of the letter and their lack of knowledge in relation to what might have occurred in the intervening period or the detail in relation to the established use, all factors which may be critical to an LDC. Englehart J found that a critical solicitor should have advised Flattery to apply for an LDC to cover all the activities he wished to undertake on the site.

However, Englehart J also considered Flattery’s knowledge of the planning issues and his decision to go ahead with the purchase. Englehart J noted that Flattery had experience of the LDC procedure from issues faced in relation to his Canvery Island site and that although he may not have been aware that the use of the site as a scrap yard was illegal, he knew from his conversations with the environmental officer that he would not be able to use the site as a scrap yard until he had obtained planning permission or an LDC. Englehart J found that in light of Flattery’s decision to go ahead with the purchase anyway he must bear substantial responsibility for his own loss.

Commentary

This case highlights further that where the use of a property is crucial to the buyer, planning permission or and LDC should always be obtained before completion of the property as even where there is strong evidence for the intended use to be lawful this does guarantee that it will be possible to obtain an LDC or planning permission. Importantly, the case also highlights that where a client has knowledge of the issues he may be found to be contributory negligent even where he had been advised negligently.