Solicitors Negligence – Damages Where Error Subsequently Corrected A Common Sense Approach By The Court Of Appeal But Is It “Good Law”?

Published 14 July 2016

The Court of Appeal has twice recently been asked to consider the correct basis for assessing damages in claims for professional negligence against solicitors who had acted in relation to property transactions.

In the first of these, Bacciottini and Anor v Gotelee & Goldsmith [2016] EWCA Civ 170, the solicitors admitted that they had been negligent when acting for the Claimants who purchased a residential property in Suffolk in May 2007 for £600,000.

The solicitors had failed to spot a condition on a planning consent affecting the property which restricted its residential use.

After the problem emerged, the Claimants applied to have the condition removed and, in late 2009, the local authority agreed to this thereby resolving the problem.

The actual costs of rectifying the problem was assessed at £250 but the Claimants brought a claim against the solicitors seeking £100,000 in damages being the difference between what the property was worth at the time they purchased it in 2007 with the restriction and what they had actually paid for the property.

In the second case LSREF III Wight Limited v Gateley LLP [2016] EWCA Civ 359, the Claimant (which had acquired the right to sue the solicitors from their original client) claimed damages against the solicitors for failing to notify them of a clause in a lease over which they were to take a legal charge of security for a loan.

The clause meant that the lease could be forfeited by the landlord if the lessee became insolvent thereby seriously undermining the value of the security.

Again the solicitors admitted negligence and the dispute was about the amount of damages that should be paid.

The landlord had agreed to remove the offending clause from the lease in return for a payment of £150,000 which the solicitors offered to pay.  The Claimant did not take up this offer and instead, claimed the difference in value between what the lease was worth at the time of the transaction with or without the offending clause.  The trial judge had found this to be £240,000.

Having been awarded damages and costs on this basis, after the trial, the Claimant went ahead with the variation of the lease and paid the landlord £150,000.

In both cases the issue for the Court was whether damages should be assessed as at the date when the negligence occurred, thereby ignoring the subsequent events, or whether those events could be taken into account in determining what damages the solicitors should pay.

The Court of Appeal decided, in both cases, that it should have regard to the subsequent events and that therefore the Claimants were unsuccessful in their attempts to recover the higher sums.

Whilst these decisions do seem, as the Court of Appeal itself said, to be common sense on the facts of the cases they do open up some difficult issues for other cases.

How far should a party have to go to rectify a problem caused by the negligence of its solicitors?  How much should it spend on this and if the attempts prove unsuccessful would it be entitled to recover the costs it incurred?

To what extent would a party be required to expend its own time and energy to resolving the problem bearing in mind that it would usually not be recompensed for this?

Can it really be right that the amount of damages may be affected by unconnected events.  For example, what if the landlord in LSREF III had refused to vary the lease but then, at some later stage, had sold the freehold and the new landlord took a different view.  How would that affect matters particularly if this was at some later stage, even after the claim had been brought?

It is easy to see why, on the facts of the cases before them, the Court of Appeal reached the decisions it has however potentially at least, this is going to increase uncertainty and argument over damages in subsequent cases.  Assessing the loss as at the date when the negligence occurred may well prove to have been a simpler and more certain test.  We suspect that the Court of Appeal has not heard the last of this problem and that there may well be other cases where the factual matrix creates much more of a headache for both the parties and the Court.  No doubt time will tell.