Solicitors’ advice should not be too forthright.
A leading law firm has been found negligent for not being cautious enough in advising purchasers as to whether an expensive London house enjoyed rights to a communal garden.
In 2008, Mr and Mrs Herrmann instructed Withers to act for them on the purchase of 37 Ovington Square in Knightsbridge.for £6.8 million. The house is situated in the “neck” of Ovington Square and does not front onto the Square itself.
Whilst the Herrmanns loved the house, they were concerned as it had no garden and they therefore wanted to be satisfied they would have a right to make use of the communal garden in the Square. They would not have purchased the house without believing there was such a right.
The solicitors for the vendor informed Withers that access to the Square was supplied as a matter of courtesy by the Garden Committee and houses that overlooked the Square paid a fee for its use but they had no paperwork as to fees paid for such use or otherwise. Because the information supplied was so unsatisfactory, Withers investigated the matter further themselves and the assistant dealing with the matter duly considered the Kensington Improvement Act 1851 which gave certain houses in Ovington Square and elsewhere statutory communal garden rights.
The 1851 Act applies to every house where the Front or Side faces or forms part of the Line of any of the relevant Squares and it provides for such residents to belong to a Garden Committee which is to manage the garden and for an annual levy to be paid. The assistant, after discussing the matter with her superior and speaking to a member of the Garden Committee, took the view that 37 Ovington Square was protected by the Act as it extended to houses situated on terraces leading to the Square and the purchase proceeded accordingly.
Unfortunately, following the purchase, a dispute arose as to whether the Herrmanns did have a right to use the communal garden. The Garden Committee contended that, as the house was in a side street, it had no such right and, after much discussion, it was only prepared to grant the Herrmanns a 50 year Licence to use the garden subject to payment of a premium of £25,000. This was unacceptable to the Herrmanns who, following receipt of specialist Counsel’s advice that they did have a statutory right under the 1851 Act, pursued proceedings instead to seek to establish their right.
The Herrmanns proceedings to establish their right to use the garden failed as the Judge held their house was not covered by the Act as it did not cover houses on terraces leading onto any Square. Accordingly, the Herrmanns then sued Withers who argued they were not negligent and that the Herrmanns had failed to mitigate their loss by not accepting the Licence offered.
It was Withers’ case that it was not negligent to have taken the view that the Act applied as this was a possible interpretation and it was one specialist Counsel had subsequently agreed with. They also made the points that clients want clear and forthright advice. However, whilst the Court agreed that the Act was unclear, it noted that the vendor had not claimed the house had any such right and Withers should have been less forthright in their view that it had. They should have made clear it was only arguable there was a right, and checked whether any levy under the Act had been paid, particularly as this issue was of importance to the Herrmanns.
Having found Withers liable, the Court considered the claim by the Herrmanns for damages of £700,000 on the basis the house had only been worth £6.1 million without garden rights. It determined that the lack of such rights reduced the value of the house by 5% and therefore gave rise to a claim for £340,000 but that the Herrmanns had failed to mitigate their loss by taking the 50 year Licence. The Court therefore based the damages on the value of the house as if it had had such a Licence and it assessed the damages at £102,600, being the total of a reduction in value of £65,000, the £25,000 premium payable for the Licence, £10,000 legal costs for negotiating the Licence, and £2,600 in relation to stamp duty that would have been saved on the lower price.
The Court also ordered Withers to pay the Herrmanns costs of the unsuccessful proceedings against the Garden Committee on an indemnity basis and to pay £2,000 for the anxiety and disappointment that had been suffered.
Clearly, this case is a reminder that solicitors do need to properly caveat their advice where a Court may take a different view and, particularly, when dealing with matters of significant importance. The Judgment also worth reading to see how a Court assesses damages.