PROVING THINGS 13: LOSS, THERE WAS NO LOSS

The case of Bacciottini -v- Gotelee and Goldsmith [2016] EWCA Civ 170 is one that may  have you scratching your head.  The claimants claimed, at one stage, over £300,000 in damages. The judge awarded £250.00.  It is a potent lesson in the need to assess the value of a claim and the impact of a simple step in mitigation which, effectively,  made the loss de minimis.

Ultimately cases of this kind have to be decided by reference to the facts.”

THE CASE

The claimants purchased property planning to develop it. The defendant solicitors omitted to advise the claimants that there was a planning restriction on the property restricting it to residential use.  The claimants purchased the property and found out about the restriction. They spent £250 to get the restriction removed. A claim was then brought against the defendants for £100,000 (initially £300,000) representing the loss the claimants stated they had suffered as a result of buying the property.  The trial judge held that the loss amounted to £250 and ordered the claimants to pay most of the costs of action. The claimants appealed.

THE JUDGMENT ON APPEAL

Lord Justice Davis stated
  1.   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.
  2.  My own reasons are, put shortly, these.
  3. 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.
  4.   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.
  5. 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.
  6. 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.
  7. 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 ofBritish Westinghouse.  I would accept Mr Gatt’s submission on this.
  8. 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.
  9. 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 The Fanis [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 inThe New Flamenco (cited above).**
  10. 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:”
  1. There is no proper basis for interfering with those findings by the trial Judge.
  2. 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.
  3. 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.
  4. 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.
  5. 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
  1. 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.
  2. In the light of my conclusion, there is no need to express any further views on other aspects of the Respondent’s Notice.
  3. 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

  1. I would uphold the decision of the Judge and dismiss this appeal

    THE CASES CITED

  2.             * Livingstone v 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.”
**  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.”

Proving things

 

2 comments

  1. I’m not sure it was a potent lesson about assessing the value of a claim. The Claimant’s argument was highly respectable, on the basis of Gardner v Marsh & Parsons. The outcome may be a potent reminder that, where there appear to be conflicting lines of authority, the Court of Appeal may well choose the line which you don’t want it to choose.

  2. I have read Gardner, it says”… the issue is primarily one of fact”. The fact was that the claimants had lost £250. They claimed £300,000 (initially) and then sought £100,000 in damages for a loss they had never suffered. The facts relied upon in mitigation were “years after” the negligence and held to be too remote. The “considerable” lapse of time in remedying the defects had prevented the claimants from selling the property. There was an attempt to impose these principles on a totally different set of facts. I still scratch my head.

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