Bacciottini & Anor v Gotelee and Goldsmith (A Firm) [2016] EWCA Civ 170

Case No A3/2014/3688

[2016] EWCA Civ 170

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

HH JUDGE SIMON BARKER QC

HC 2013 000094

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 18/03/2016

Before

LORD JUSTICE DAVIS

LORD JUSTICE LLOYD JONES

LORD JUSTICE UNDERHILL

Between

BACCIOTTINI & ANRAppellants

GOTELEE AND GOLDSMITH (A FIRM)Respondent

David Halpern QC and Teresa Rosen Peacocke (instructed by Keystone Law) for Appellants

Ian Gatt QC and Graeme Robertson (instructed by Herbert Smith Freehills LLP) for Respondent

Hearing Hearing dates: 19 & 20 January 2016

Judgment

Introduction

[1]This appeal raises an issue on the applicable measure of damages. It arises out of the admitted negligence on the part of the respondent firm of solicitors. The appellants had acquired a residential property in May 2007. The respondent had negligently failed to advise them that there was a planning restriction attached to the property restricting its residential use. Subsequently, after the purchase had been concluded, the appellants successfully procured the removal of the planning restriction. The trial Judge awarded as damages to the appellants the sum of £250, representing the cost of the application to the local authority to remove the planning restriction. He awarded nothing more.

[2]The appellants say that the Judge was wrong to do so. Their principal ground of appeal is that the Judge should have awarded them the sum of £100,000 (with interest) representing, as found, 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. The respondent, on the other hand, says that the Judge reached the right conclusion. It also seeks to support his reasoning by points advanced in a Respondent’s Notice; and, in the alternative, raises a challenge to the finding that the diminution in value, if taken at May 2007, was £100,000.

[3]Since the Judge ordered the appellants to pay the great amount of the respondent’s costs it may be that this appeal has in reality become as much about costs as about damages. At all events, we were informed that previous attempts at mediation were unsuccessful.

[4]Before us, the appellants were represented by Mr David Halpern QC, leading Mrs Teresa Rosen Peacocke. The respondent was represented by Mr Ian Gatt QC, leading Mr Graeme Robertson. I would pay tribute to counsel on both sides for their careful and thorough arguments.

Background facts

[5]The background facts are these.

[6]Mr Bacciottini is an experienced residential property developer. Over the years he had involved himself in a number of individual development projects, many of them in East Anglia. For a number of years he had for this purpose retained the services of the respondent firm, having a good working relationship with one of the partners there. When that partner left, he continued to instruct the firm through another partner to whom he had been introduced, Mr Mathers.

[7]In 2004 Mr Bacciottini met Ms Cook. She had not herself previously been professionally involved in property development. But she was very interested in design and had herself developed a property in Suffolk on her own account and in due course also assisted Mr Bacciottini on a development project in Italy. The relationship became a personal one; and the couple proposed as a long-term aim to divide their time between Italy and Suffolk. It was also agreed that the two of them would look for a suitable property in England as a first shared development project for them to undertake.

[8]As it happened, a property called “the Granary” at Church Common near Snape in Suffolk was on the market in early 2007. The guide price was £575,000. The Granary had formerly been part of the nearby Snape Hall. The agents’ Particulars described the Granary as being “a unique property which offers a number of exciting possibilities.” With the property there was a large barn of which it was said:

“There is potential (subject to planning consent) to incorporate the barn as part of the residential accommodation or possibly as a self-contained annexe to the cottage.”

Also included in the sale was a further outbuilding known, for historical reasons, as “the Jam Factory.” It was suggested in the Particulars that prospective purchasers might be interested in applying for a change of use to convert that building into some self-contained form of holiday accommodation.

[9]The appellants were most interested. They retained the respondent firm. They made an offer at the asking price of £575,000 which was accepted. This was then increased by a further £25,000 in respect of an additional adjoining garage now to be included in the purchase.

[10]With his experience, Mr Bacciottini was well alive to the importance of planning permissions and local searches. He instructed Mr Mathers in January 2007 to carry out the necessary searches. For reasons that did not really emerge there was then considerable delay in obtaining these searches.

[11]The overall intention of the appellants, as explained to their solicitors, was to extend and renovate the Granary and also to develop the barn and the Jam Factory, with a view to then selling the properties. They proposed to live at the Granary while the works were being undertaken. To this end they undertook detailed preliminary appraisals and retained an architect.

[12]A Deed was prepared to reflect the terms of the business partnership between Mr Bacciottini and Ms Cook on this project. This was signed on 27 April 2007. In addition, the Purchase and Sale Contract was signed with a view to forthcoming exchange, as the two were about to go to Italy.

[13]Mr Bacciottini had been pressing Mr Mathers about the results of the searches. On the 10 May 2007 he and Ms Cook were told by Mr Mathers over the telephone, whilst they were in Italy, that the searches had arrived and everything was clear. Mr Bacciottini asked about a planning consent granted in 1974 for change of planning use for the Granary from agricultural to residential, of which he had been made aware. He was told that there were no adverse conditions.

[14]They instructed exchange of contracts accordingly. This was effected on 14 May 2007. The purchase of the Granary was completed on 27 May 2007 at the price of £600,000. Significant mortgage borrowing of £495,000 was obtained for this purpose.

[15]In the aftermath of the acquisition the appellants’ development plans were sought to be implemented. Negotiations with neighbours arose which required some quite significant adaptations. Mr Bacciottini sold the house which he at that time owned and occupied as a residence and subsequently moved into the Granary permanently in May 2008. Previously the local property market had been strong but by then, as Mr Bacciottini put it in his witness statement, “clouds were gathering”.

[16]During the course of 2008 the appellants retained new solicitors in place of the respondent. To the appellants’ utter shock they then discovered that the 1974 Planning Consent for the change of use of the Granary had been granted on the condition that the Granary was restricted to being a building ancillary to Snape Hall and could only be used for residential purposes in conjunction with the occupation and ownership of Snape Hall. But Snape Hall had been sold off as an independent residence a number of years previously.

[17]Mr Bacciottini was well aware of the implications of this. He said this in the course of his witness statement:

“102. Had I obtained this information prior to purchase, regarding the Restriction, I would have been aware of the risks and the Second Claimant and I would have taken appropriate steps to protect our interests. I would have regarded the mortgage valuation as defective, the Second Claimant and I certainly would not have purchased The Granary at the price of £600,000.00. Only if I renegotiated the purchase price to reflect its negative planning history would I have been prepared to consider completing the purchase at the revised price. Even then, the Second Claimant and I might well have decided that the project was too risky for a first attempt at a joint development project. 123. Had I been notified of the Restriction before exchange, I would not have paid £600,000 pounds for The Granary. I would never have purchased The Granary without the results of local searches. I relied upon Mr Mathers to carry out the searches, as he said he had done, and to advise us clearly on what they revealed.”

[18]As was accepted by Mr Bacciottini at trial, he was at that stage, having been made aware of the restriction, advised by his new solicitors to apply for a lifting of this restriction. The general understanding was that there were good prospects of a successful application. In the meantime, the appellants continued to reside at the Granary.

[19]In the event, Mr Bacciottini decided also to include in the planning application to remove the restriction his ongoing proposals to convert the barn and to extend the Granary. This combined application was submitted in January 2009. After some weeks it began to emerge that such a composite application would not be likely to succeed. Mr Bacciottini thought of selling up but rejected the idea as uneconomic. He consulted the planning department at the local District Council. It was suggested to him that he should first apply to lift the restriction, as a free-standing application, and then make other, sequential, applications for his and Ms Cook’s proposed development.

[20]On 8 September 2009 the appellants applied to the District Council to lift the restriction, in order to enable The Granary to be used as an independent residential dwelling. The fee for the application was £250. No objections were raised. The application was recommended for approval. Approval was speedily granted by the District Council on 3 November 2009 and notified to the appellants on 13 November 2009. It is to be gathered that their subsequent applications relating to the barn and the extension also succeeded.

[21]In the meantime a letter before claim had been sent to the respondent firm.

The course of the proceedings below

[22]The claim form was issued on 12 March 2013 in the Chancery Division. The alleged negligence was particularised (and ultimately not disputed). It was asserted that, had they received proper advice as to the planning restriction, the appellants would not have purchased the property. It was asserted that its actual value with the restriction was no more than £300,000. It was said in the alternative that if they had purchased the property they would have done so for no more than its actual market value, alleged to be £300,000, with consequential reductions in stamp duty, mortgage interest and so on.

[23]Included in the defence was an assertion that:

“The planning restriction could be (and was in fact) lifted at very little cost and did not have a material effect on the value of the property, which was in the region of £600,000”

. It was denied that any loss had been suffered other than the cost of lifting the planning restriction.

[24]In due course, reports of planning and valuation experts were obtained and exchanged. Those of the appellants’ experts were pessimistic. Their planning expert considered that in May 2007 the prospects of applying successfully for the lifting of the restriction were doubtful. Their valuation expert thought, on such basis, that the property was worth no more than £300,000. The view of the respondent’s planning expert was that there were good prospects for removing the restriction in May 2007. The view of the valuer instructed on behalf of the respondent was also more optimistic. He thought that, on the basis that there was “good reason” to think that the restriction could be lifted in 2007 if an application were made, the value would be much higher than the appellants were saying.

[25]In his first report, the respondent’s valuation expert (Mr Fletcher) stated that his opinion was that the value of the property at May 2007 without the restriction was the sum of £550,000 (as against the agreed sale price of £600,000). With the restriction it was “in the region of £450,000”. He thought that in reality there would have been negotiations. He went on to note this:

“If the transaction had to be completed with the restriction in place a negotiated discount on the Granary building alone might have been settled on in the region of £75,000 to £100,000 but even then the vendors might insist upon a mechanism to recover the money especially with the strong likelihood that the restriction could be lifted.”

[26]The two valuation experts then had a meeting on 24 February 2014. It was noted in their joint statement that their valuation views had in part been predicated on the views of the planning experts as to the prospects of applying successfully to lift the restriction. They maintained their respective valuations.

[27]Subsequently, the respondent’s valuation expert put in a “Clarificatory Addendum” to his first report and to the joint statement. In this further report, he distinguished between two hypotheses. Hypothesis A was that there were strong prospects of lifting the restriction. Hypothesis B was that there were poor prospects of lifting the restriction. Under hypothesis A, he mooted the suggestion that, in reality, if made aware of the restriction, the parties would have renegotiated, perhaps coming up with a conditional contract. On that postulated scenario he said:

“In my view, the likely discount in such a scenario to reflect the inconvenience and cost to the buyer would have been up to £20,000”

. Under hypothesis B, his view was that:

“…..the discount applied by the developer to reflect this risk and any alternative uses is likely to have been in the region of £110,000. This is a significant discount and assumes the sellers did not have time to mitigate their losses.”

The judgment of the trial Judge

[28]The trial Judge was HH Judge Simon Barker QC, sitting as a Judge of the Chancery Division. He gave his judgment orally, after a day had elapsed from the conclusion of evidence and arguments.

[29]By the time of the trial liability had been admitted. The evidence of Mr Bacciottini was for the most part accepted by the Judge, albeit with some reservations. No express finding, it may be noted, was made as to whether (had they been properly advised) the appellants would have pulled out of the proposed purchase or whether they would have proceeded with a view to attempting to negotiate and agree a lower price.

[30]The Judge rejected an argument on behalf of the appellants that the restriction affected not only the Granary but all the buildings on the site. There is no appeal against that conclusion. Having done so, the Judge considered the written and oral evidence of the experts at some length. He noted that the context was that of the case against the respondent firm being one of failure to provide information.

[31]Having appraised the expert planning evidence the Judge found that the prospects of lifting the restriction, both in and after 2007, were “very high.” He then made these findings (findings which are the subject of the Respondent’s Notice):

“57. So, as to the valuation as at 30th May 2007, subject to the 1974 condition, Mr Fletcher opines that the diminution in value would have been some £100,000 to £110,000 if there was a very high probability that an application to lift the condition would be successful; and further, that an additional diminution in value of £50,000 to £60,000 should be taken into account if the prospects were no better than 50/50, which was Mr Hancock's view. 58. On the evidence before me, I accept Mr Fletcher's opinion as to the diminution in value on the basis of a very high likelihood that an application to lift the 1974 condition would be successful. Accordingly, the actual value of the property at the material times in 2007 was some £450,000, and the overpayment some £100,000.”

[32]He then went on to refer to an argument of Mrs Peacocke, who had represented the appellants at trial, that the appellants would either have bought at a price reflecting the actual value or would have withdrawn and spent no money. As to that,

the Judge said this:

“60. I do not agree that the choices were that straightforward. In particular, I am not persuaded that there were only two possible outcomes. On the contrary, I think that Mr Fletcher's observations and evidence of alternative outcomes, which would involve one or other of the parties applying for the 1974 condition to be lifted, is a more likely outcome than Mr Bacciottini and Ms Cook simply purchasing at £450,000 or walking away.”

[33]The Judge went on, in paragraph 64, to describe an application to lift the restriction as “a simple, obvious and cheap step to take”. Having done so, he rejected the assertion that any negotiation would, on the probabilities, have resulted in a sale at anything approaching £450,000. He said that an award of damages, on that basis, of some £100,000 “would overcompensate” the appellants. The Judge then went on to hold that the case was properly to be decided by applying principles of mitigation, he accepting that the issue was “fact and context sensitive”. After evaluating further aspects of the evidence he said this:

“84. The plain fact is that Mr Bacciottini and Ms Cook had no realistic option other than to make an application for the condition to be lifted. That is the course that any sensible owner and occupier, circumstanced as they were, would have taken. It is a direct consequence of, and is directly caused by, the lack of information resulting from the negligence of Gotelee. ” 85. My conclusion on the facts of this case is that Mr Bacciottini and Ms Cook's application to have the 1974 condition lifted was made pursuant to their duty to mitigate their losses. 86. The decision to make the application was not independent of Gotelee's negligence and did not arise independently as part and parcel of Mr Bacciottini and Ms Cook's series of planning applications. . . . . 88. It follows from this that the loss claimed, the overpayment, if, contrary to my judgment, that is the correct measure of loss, was eradicated by mitigation. It also follows that the special damages claim fails.”

The authorities

[34]In order to explain the nature of the respective arguments of counsel it is, I think, unavoidably necessary to refer at this stage to a number of the authorities cited to us. Reported cases in this field are legion, although mercifully counsel were, to a degree, selective in their actual citations to us; and I propose to be further selective from that selection. We were also referred to a most interesting article by Andrew Dyson and Adam Kramer entitled “There is no breach date rule: mitigation, difference in value and the date of assessment” published in (2014) 130 LQR 259.

[35]The first case – and in my view one which can still be taken as encapsulating the core principle in cases of this kind - is Livingstonev Rawyards Coal Co.(1880) 5 App. Cas. 25. As stated at page 39 by Lord Blackburn, 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.”

[36]The next case to which I would refer, and which was Mr Halpern’s own starting point, is Philips v Ward

[1956] 1 WLR 471

. That was a case where a negligent survey had been provided to prospective purchasers of a house. It would have cost £7,000 to put the property into the condition in which it had been described in the report. However the correct measure of damages was adjudged by the Court of Appeal to be not £7,000 but £4,000. The latter figure represented the difference between the value of the property as it should have been described at the time of its acquisition and its value as described. In the course of his judgment Denning LJ stated that:

“The general principle of English law is that damages must be assessed at the date when the damage occurred, which is usually the same day as the cause of action arises……..”

[37]In County Personnel (Employment Agency) Ltd v Alan R Pulver & Co [1987]1 WLR 916, there was a negligent failure to explain difficulties with a rent- review clause and other obligations in a lease. In the course of his judgment Bingham LJ, at pages 925 – 927, gave a valuable eight point summary of the relevant principles. In the course of that he referred to Philips v Ward and to related cases. He pointed out that the diminution in value “rule” is not an invariable approach and not to be “mechanistically applied.” At p.927, Sir Nicolas Browne-Wilkinson V-C observed that the diminution in value “rule” was concerned with cases where the client had purchased for a capital sum a property having a capital value: which was not the instant case. In agreement with Bingham LJ, he thought that the sum needed to be paid by the plaintiffs to release themselves from the burdensome lease represented the true measure of damage under that particular head (there were other heads of damage claimed).

[38]In Hussey v Eels

[1990] 2 QB 227

, the purchasers of a property for a price of £53,250 had relied on a negligent misrepresentation that the property had not been the subject of subsidence. In fact it had. The cost of the required works was £17,000, which they could not afford. Two and a half years later, they obtained planning permission to knock the property down and build two new properties: they then sold all the land, with the benefit of the planning permission, to developers for £78,500 and moved out. It was held that they had been under no duty to mitigate by obtaining planning permission, selling and moving. Accordingly the “profits” made on the resale accrued to their own benefit and were not, as a matter of reality, caused by the original negligence. It was not “part of a continuous transaction of which the purchase of land and bungalow was the inception” (per Mustill LJ at p. 241).

[39]In Watts v Morrow

[1991] 1 WLR 1421

, the question again was, in the context of a negligent survey whether the measure of damages was the cost of the necessary repairs (a higher sum) or the difference in value of the property as represented to be and its value in its actual condition (a lower sum). Philipsv Ward was described by Bingham LJ at p. 1444 as laying down a “prima facie rule” for measuring damages. “The crucial question is whether that prima facie rule was, as the Judge held, inapplicable to the facts of the present case.” The Court of Appeal held that the prima facie rule applied in that case. Otherwise the plaintiffs would, if awarded the costs of the repairs, be overcompensated.

[40]In Kennedy vVan Emden [1996] PNLR 409 solicitors negligently failed in 1983 to advise the purchaser of an underlease that no premium could, by statute, lawfully be charged. In 1989 the statutory prohibition was removed. The purchaser then discovered that the premium had unlawfully been charged in 1983. It was held that she had suffered no loss, by reason of the removal of the prohibition in 1989. Nourse LJ said (at p. 414) that:

“the damages are to be assessed in the real world. Compensation is a reward for real, not hypothetical, loss. It is not to be made an occasion for recovery in respect of a loss which might have been, but has not been, suffered.”

The court thus declined, on the facts, to apply the diminution in value rule: on the footing that no loss had, in the event, been suffered. Ward LJ referred (at p. 418) to the “dictates of fairness and justice”.

[41]In WapshottvDavis Donovan & Co [1996] PNLR 361, solicitors negligently in 1986 failed to advise purchasers that there was no good title to part (an extension over an adjoining property) of a leasehold flat which they were buying. The problem came to light in 1988 when they wished to sell. They were unable to do so. In 1990 a property company, which had in the interim acquired the freeholds of both properties, registered the titles; and eventually in 1992 the original purchasers of the flat successfully registered the leasehold title to their flat, which thereby became sellable. On an application by the solicitors to adduce further evidence in negligence proceedings then current in order to rely on these subsequent events, it being said that the plaintiffs would otherwise be overcompensated, it was held that such subsequent events were “irrelevant” to the issue which had to be determined. Thus the Master assessing the actual value of the lease with a defective title in 1986 could not properly pay regard to events which were taking place in 1992 (see at pages 376-377 per Beldam LJ). Hobhouse LJ emphasised (at p.379) that:

“Cases of this kind depend on their own facts.”

[42]Gardner v Marsh & Parsons

[1997] 1 WLR 489

was another case involving negligence on the part of surveyors. They negligently advised purchasers of a leasehold property in 1985 which, as it transpired, had substantial repairing defects. As it happened, the lease which had been acquired contained a repairing covenant on the part of the landlords. The defects were discovered three years later. The landlords (after lengthy negotiation) effected the necessary repairs in 1990. The trial judge decided to award damages reflecting the difference between the value of the property without the defects and its value with them at the date of purchase. That was upheld in the Court of Appeal, by a majority. Mr Halpern placed considerable reliance on this decision. He emphasised that the argument that no loss had been suffered as the landlord had undertaken the repairs was rejected. It may be noted, however, that Kennedyv Van Emden was not cited in Gardner.

[43]In his judgment, Hirst LJ, after reviewing a number of authorities, described the case “as a straightforward Philips v Ward type of case” (at p. 496). As to the argument that the loss had been avoided Hirst LJ took the view (at p. 503) that:

“having regard to intervening events and to the long interval of time, the repairs executed in 1990 were not part of a continuous transaction of which the purchase of the lease as a result of [the surveyors] negligence was the inception. Furthermore, these repairs undertaken by [the landlords] at the plaintiff’s insistence were res inter alios acta and therefore collateral to [the surveyor’s] negligence.”

[44]Given that the repairs were effected pursuant to an obligation in the very lease which had been purchased this was, it has to be said, a striking conclusion. In the result, Peter Gibson LJ dissented.

[45]As stated by Peter Gibson LJ at p.505, and as is surely uncontroversial as a general proposition:

“The law does not permit the plaintiff to recover more than is seen to be his actual loss and the rules of mitigation may deprive the plaintiff of all or part of the damages for loss which otherwise he might have recovered.” “Whilst Philips v Ward establishes that the measure of damages is the price paid less the market value of the property at the date of the breach, even though the cost of repairing the property may be greater or smaller than that, it does not follow that the rules of mitigation can never apply to such a case. That would be contrary to the British Westinghouse principle. Indeed as Mustill LJ pointed out in Hussey v Eels [1990] 2 QB 227, 233, any generalisation that where a loss has crystallised in terms of there being a conventional measure of damages at the date of breach, there can be no mitigation as shown by the Pagnan case [1970] 1 WLR 1306 to be unsound. For my part I cannot see why the advantage accruing from the action of the plaintiff in that case to mitigate his loss, viz. the elimination of the risk to the house by the felling of the poplars, should be left out of account in arriving at the award of damages and there is nothing in Philips v Ward [1956] 1 WLR 471 to compel such a result…” “The common sense of the situation in the present case is that once the Plaintiffs were aware that they had purchased a structurally defective property of less value than the price they had paid as a result of the Defendants’ negligence, they sensibly and promptly took steps to eliminate their loss by procuring the remedying by the freeholder of the defect. That seems to me plainly an act of mitigation resulting in a benefit to the Plaintiffs which eliminated their loss. I repeat what the Judge said, that they have a rectified property worth the equivalent of what they had paid for it without any extra cost to them. The significant point is that this occurred as a result of the pressure applied to the freeholder by the Plaintiffs. To take an example suggested by Mr. Brunner, if the Plaintiffs had sued both the freeholder under the Defective Premises Act 1972 and the Defendants in negligence in the same action they could not expect to recover damages in full from the freeholder as well as damages in full from the Defendants. Once the property had been put in repair at no cost to the Plaintiffs, in my judgment they cannot be allowed to obtain double recovery by an award of damages against the Defendants. To adapt the words of Salmon L.J. in R. Pagnan & Fratelli v Corbisa Industrial Agropacuria Limitada [1970] 1 WLR 1306, 1316, to allow the plaintiffs' claim would be contrary to justice, common sense and the British Westinghouse Electric and Manufacturing Co. Ltd v Underground Electric Railways Co. of London Ltd. [1912] A.C. 673 principle.”

[46]A subsequent decision of the Court of Appeal, on which Mr Gatt in turn placed reliance, is Gregory v Shepherds [2000] PNLR 769. In that case, on a purchase in 1989 for £60,000 of a property in Spain, the solicitors had been negligent in failing to advise that there was a subsisting legal charge previously entered into by the selling company over the property. The amount of the charge was around £44,500. This was discovered when the buyers sought to sell the property for £52,500 a year later, in 1990. Eventually the amount of the charge was repaid by the original sellers in 1999; and in 2000 the property was then sold by the buyers for £50,500. It was held that the proper measure of damages was the cost incurred by the buyers in procuring the removal of the charge, together with damages for being kept out of the sale price of £50,500 from 1990. It is to be noted that this conclusion was reached in a case which did not involve action taken by the aggrieved buyers but where the adverse incumbrance (the charge) was lifted by payment made by a third party (the seller): that is to say, it was, as with Kennedy v VanEmden, not strictly a case of mitigation as such.

[47]In giving the principal judgment, with which the other members of the court agreed, Morritt LJ noted that at the time of purchase in 1989 the residual value (having regard to the charge) was £15,500. On one view the difference as a prima facia measure of damages (cf. Philips v Ward), would seem to be the amount payable, together with any further wasted costs of purchase. But that was not the court's conclusion. What Morritt LJ said, at paragraph 46 of his judgment, included these observations:

“(a) The defect was ultimately removed by redemption at the expense not …. of the Gregorys but of the company. I would not award the capital sum of £44,500 referred to in paragraph 38 above. No loss of that amount had been crystallised by a sale. The defect and, therefore, the theoretical loss was avoided by the belated performance of the contract of sale by the company. Such performance was a part of the continuous transaction of which the purchase of the apartment was the inception. Such transaction involved the company, the Gregorys and Shepherds. I do not think that the decision of the court in Gardner v Marsh & Parsons [1997] 1 WLR 489 requires this court to overlook the economic realities of the case and impose on Shepherds liability for a loss which in the event the Gregorys did not sustain. (b) I agree with the judge that the appropriate measure for compensation for a removable defect which has been removed should be compensation for its existence from the time when it should have been removed to the time it was in fact removed….”

[48]We were also referred to the decision of Mr Geoffrey Vos QC, sitting as a Deputy Judge of the High Court, in the case of Pankhania v London Boroughof Hackney

[2004] EWHC 323 (Ch)

. He there said in the context of that case (at paragraph 21), after referring to the “normal measure” indicated in Phillips vWard:

“The question really is whether, in all the circumstances of the case, the normal measure properly reflects the overriding compensatory rule....”

He went on to say this at paragraph 36:

“In a case where the normal measure is applicable, the normal measure will not be reduced because particular losses have in fact been avoided, nor will it be increased because the transaction has turned out worse for the claimant than it might have, due to some subsequent misfortune: But that is because the court will have already decided, in the words of Lord Browne-Wilkinson in Smith New Court, that the normal measure gives a "fair result", or, in the words of Lord Steyn in the same case, that the normal measure "give(s) effect to the overriding compensatory rule".”

[49]I would finally note the recent decision of the Court of Appeal in The New Flamenco

[2015] EWCA Civ 1299

. In that case a charterer was in repudiatory breach of a charterparty. The owners accepted the repudiation and claimed for the lost profit of the remaining two years of the time charter. The owners in the event during that period sold the ship for a profit in excess of the lost profits on the time charter. They would not have been able to sell at a profit had they sold after the expiry of the time charter. The Court of Appeal accepted that the sale was an act of mitigation and that the profits arising from the sale of the ship had to be brought into account for the purposes of calculating damages. In the course of his judgment Longmore LJ said this at paragraph 23:

“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.”

At paragraph 47 of his judgment, Christopher Clarke LJ said:

“The issue of mitigation arises when the breach has had harmful consequences which the injured party has taken steps to ameliorate.”

Arguments

[50]I have been through many of the authorities cited to us (although by no means all) out of respect to the thorough arguments of counsel. Indeed, a review of those authorities makes it easier to see and understand how the respective cases are put.

[51]Mr Halpern took as his starting point, as I have indicated, what he would describe as the general principle set out in Philips v Ward. He said that here too this is a case of capital loss, not ongoing loss. He went on to say that the prospects of lifting the restriction in the future would already be included in the assessment of diminution of value at the time of acquisition. Moving on from that, he said that the present case is comparable to Hussey v Eels, Wapshott v Davis Donovan and Gardner v Marsh and Parsons. Accordingly, the appellants were and are entitled, by way of damages, to the difference in value of the property without the restriction and with the restriction, as at the date of purchase: £100,000 on the Judge's findings. The subsequent successful application to remove the restriction was, he said, the collateral and independent decision and act of the appellants pursued for their own benefit: it was, he said, extraneous to, and lacked sufficient causal connection with, the original breach of duty by the respondent.

[52]A particular point that Mr Halpern pressed is that in the present case the appellants, had they been properly advised, could (he said) have purchased the Granary for a price reduced by negotiation. They then could have applied to lift the restriction as part of their development plans: and the ensuing gain would then have been theirs outright. But in the events that occurred they were disabled from achieving that.

[53]Mr Gatt, on the other hand, submitted that, in the result, by reason of the successful application to lift the restriction the appellants got what they should have got. To award them damages by reference to the diminution of value at the time of purchase would involve double payment and overcompensate them for loss that, in the event, they had not suffered. He further submitted that the appellants had been under a duty to mitigate by applying to lift the restriction: which was both what they were advised to do and what they actually did. But even if they were under no such duty, they still had done so; and accordingly the consequence had to be brought into account under the principles of British Westinghouse. (He made clear that would be his position even if the prospects of lifting the restriction had not been assessed as very high.) He submitted, overall, that this case was of a type illustrated by cases such as Kennedy v Van Emden and Gregory v Shepherds.

Disposition

[54]As the arguments wore on, and having also reflected further since the hearing, I have increasingly come to the view that there is rather less to this case than possibly first meets the eye and which doubtless prompted leave to be given on the papers by the Single Judge. I am of the clear opinion that the Judge (even if, in some respects, certain passages of his judgment and aspects of his approach are debatable) reached the right conclusion.

[55]My own reasons are, put shortly, these.

[56]What determines the outcome of this case in my view is an application, by reference to the facts, of the core principle set out in Livingstone v Rawyards Coal Co. (cited above). By reason of the subsequent removal of the restriction the appellants have suffered no loss and there is nothing in respect of which they require to be compensated. That is the nub of it.

[57]I do not agree with Mr Halpern's insistence that the matter should simply be assessed as at the date of the purchase of the Granary on 27 May 2007 and that the loss was “fixed” on the date; or with his insistence that this case should be decided by the application of what he styled the "principle" of Philips v Ward. In my view it is wrong to treat Philips v Ward as establishing any kind of immutable principle in relation to what are styled "capital loss" cases. On the contrary, the various authorities make clear that the proposition enunciated in Philips v Ward is not to be applied invariably or mechanistically. As Mr Vos QC neatly summarised the position in Pankhania, what he styled the "normal measure" is only to be applied if it produces a fair result. That accords also with, for example, the approach taken in Kennedy v Van Emden and with the remarks of Nourse LJ and Ward LJ. That is not to make "fairness" in itself the underlying principle - that would be so vague and uncertain as to be unprincipled. But it does reinforce the point that the assessment of damages is to be undertaken realistically and not mechanistically. Philips v Ward, in a capital loss case, thus no doubt is a convenient starting point: no less but, equally, no more.

[58]The problem with Mr Halpern's approach is that it in effect precludes consideration of subsequent events. But there is no reason why subsequent events necessarily should be precluded. Mr Halpern in terms submitted that where a case was a "capital loss" case, as he styled it, then subsequent events are always irrelevant. There is no authority to support so sweeping and generalised an assertion: and it would be contrary to the approach taken in cases such as, for example, Kennedy v Van Emden and Gregory v Shepherds. Moreover, consideration of issues such as mitigation and avoidance of loss necessarily will be geared to events occurring or steps taken after the date of breach and after the cause of action has accrued. Philips v Ward was simply a case where such issues did not arise. It did not purport to say that such issues could never arise.

[59]In the present case they most certainly do arise. The breach of duty lay in the failure of the respondent to inform the appellants of the existence of the restriction, by reason of which negligent advice they proceeded with the purchase of the Granary. The defect (that is, the restriction) was subsequently removed on their application. On the scenario so arising, I would myself regard the present case as an illustration of ordinary principles of mitigation. In my judgment the appellants were indeed under a duty to take steps to seek to remove the restriction. To do so was not out of the "ordinary course of things": to the contrary. This was not equivalent to, for example, having to engage in lengthy, costly and uncertain litigation. On the contrary, the Judge found as a fact that there was as at May 2007 a "very high" likelihood that an application to lift the restriction would be accepted (and as was borne out by events). He found as a fact that the step of applying to lift the restriction - a step which the appellants had been professionally advised to take - was a "simple" one. He found as a fact that such a procedure was "simple, obvious and cheap". There is no basis whatsoever for interfering with those findings of fact.

[60]In any case, even if (contrary to my own view) the appellants had not been under a duty to take such a step by way of mitigation then the fact remains that they did take such a step: thereby avoiding their putative loss. Thus that would fall to be brought into account under the principles of British Westinghouse. I would accept Mr Gatt's submission on this.

[61]Mr Halpern nevertheless argued that the course of action adopted by the appellants, in retaining the property and applying to lift the restriction, was an “independent development decision”, as he put it, pursued for the appellants’ own benefit and taken at their own risk. He also noted that the restriction was only lifted some two and a half years after the purchase, in November 2009.

[62]I do not agree at all. For myself I would take the view that, in dealing with principles of mitigation and avoidance of loss, perhaps it is not particularly enlightening to talk in terms of whether the original breach “caused” the mitigating or avoiding act. One comprehensible way of formulating the position perhaps is that enunciated by Mance J in TheFanis [1994] 1 LL. Rep. 633: by asking whether the asserted act of mitigation generating the benefit “arose out of or was sufficiently connected with a breach to require to be brought into account in assessing damages.” In my view, at all events, the essence of the approach required is sufficiently captured by the remarks of Longmore LJ in paragraph 23 of his judgment in TheNew Flamenco (cited above).

[63]On no realistic appraisal could the act here of the appellants in applying successfully to lift the restriction amount to a collateral transaction independent of the original breach. The original breach was not simply mere context for the application: it was the reason for it and why it was considered necessary. As

the Judge found at paragraph 84 of his judgment and I repeat:

“The plain fact is that Mr Bacciottini and Ms Cook had no realistic option other than to make an application for the condition to be lifted. That is the course that any sensible owner and occupier, circumstanced as they were, would have taken. It is a direct consequence of, and is directly caused by, the lack of information resulting from the negligence of Gotelee:”

[64]There is no proper basis for interfering with those findings by the trial Judge.

[65]Ultimately cases of this kind have to be decided by reference to the facts. As to Gardner v Marsh & Parsons, on which Mr Halpern placed so much reliance, the statements of Hirst LJ and Pill LJ in the majority and of Peter Gibson LJ in the minority (in what, if I may say so, was a most powerful dissenting judgment) are in essential accord as to the principles. Where the judges parted company in that case was on the application of the principles to the facts of the case: that is, whether the procuring of the landlord, a considerable number of years later, to undertake the necessary repairs was to be regarded as res inter alios acta and as an independent transaction. The same goes for Wapshott v Davis Donovan: which in any event was a decision also coloured by the context of the point being sought to be raised in a very late application to adduce fresh evidence.

[66]Although I would reach this conclusion by application of ordinary principles of mitigation, in practical terms the same conclusion is reached, in the circumstances of this case, by saying that the measure of loss is the cost to the appellants of removing the (eminently removable) defect: that is, in the event, the £250. Accordingly, to the extent that Mr Halpern was seeking to articulate some kind of principle that would compel a conclusion in his favour as to the measure of loss, such an approach, as I have already indicated, simply could not sit with the decisions in, for example, Kennedy v Van Emden and Gregory v Shepherds or, indeed, with ordinary principle. Those cases confirm the critical importance of the factual context to the determination of the proper measure of damages to be applied and the need to secure a fair outcome.

[67]I also add that in my view – as was the Judge’s view – the fact that over two years elapsed before the restriction was removed is, in the circumstances of this case, immaterial. The appellants first discovered the defect in 2008 and in any event some period of the further delay which then occurred was because the original application to lift the restriction was, at the election of the appellants, initially conjoined with their other planning applications. Once it was pursued as a free-standing application, it was readily granted within a matter of weeks.

[68]As to Mr Halpern’s argument that the appellants were, by reason of the respondent’s negligence, deprived of the opportunity to acquire the Granary (with the restriction) at a reduced price and then seek to have it removed, thereby increasing the value of the property and generating a profit to them, that did not impress me. The point is not obviously right as a matter of approach and is obviously wrong as a matter of fact. It does not accord with the Judge’s findings in various passages of his judgment. There was no firm evidence from Mr Bacciottini, moreover, that that was a course that he either would or could have pursued. On the contrary, he stressed his generally cautious approach and in particular his concern not to expose Ms Cook to risk, this being her first development venture. He also himself pointed out in his evidence the difficulty, indeed impossibility, in obtaining a residential mortgage (as he had obtained) had there been identified a restriction on residential use. Yet further, there was no evidence at all as to what stance the vendors would have taken had this problem been raised with them.

Other points

[69]Both Mr Halpern and Mr Gatt were agreed that there were some aspects of the Judge’s reasoning in his judgment which could not easily be supported. Nor did he address the arguments or authorities on measure of loss as such. In particular, by in effect adopting at one stage the approach suggested by the respondent’s valuation expert in his reports the Judge entered into a factual consideration of what might have eventuated had the appellants entered into negotiations with the vendors if the problem had been identified at the time. Not least because of the absence of any evidence from the vendors on such a hypothetical scenario, that would be speculation. In any event, such matters in principle normally have to be assessed by reference to the proper market value, objectively assessed: not by asking what the individual vendor in any given case may or may not have been prepared to hold out for or accept. But be that as it may, this aspect of the judgment has no ultimate bearing on the Judge’s overall conclusion as to the loss suffered and as to the mitigation or avoidance of the loss.

[70]In the light of my conclusion, there is no need to express any further views on other aspects of the Respondent’s Notice.

[71]I would finally add this. Mr Gatt courteously acknowledged the tremendous shock which the appellants must have had when they first learned of the existence of the restriction. He acknowledged the upset and anxiety that it will have occasioned. But, he said, this ultimately was a case of “all’s well that ends well”: and there was no occasion for pursuing a claim - initially, indeed, put at some £300,000 – for substantial damages. At all events, no claim for distress and inconvenience (which in any case ordinarily would attract only a relatively modest award) was pursued. It was not said that by reason of the restriction the appellants had to rent alternative residential accommodation at cost to themselves. It was not said that by reason of delay occasioned by having the restriction removed the building costs for the appellants’ proposed redevelopment were increased. It was not said that the existence of the restriction prevented a speedy profitable onward sale. The case thus had to be decided, there being no such claims for special damages, on the claim as advanced by reference to diminution in value.

Conclusion

[72]I would uphold the decision of the Judge and dismiss this appeal.

[73]I agree.

[74]I also agree.