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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Orientfield Holdings Ltd v Bird & Bird LLP [2015] EWHC 1963 (Ch) (26 June 2015)
URL: http://www.bailii.org/ew/cases/EWHC/Ch/2015/1963.html
Cite as: [2015] 6 Costs LO 667, [2015] EWHC 1963 (Ch), [2015] PNLR 33
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CHANCERY DIVISION
The Rolls Building Fetter Lane London WC2 A2U |
||
B e f o r e :
(Sitting as a Judge of the High Court)
____________________
| ORIENTFIELD HOLDINGS LTD | ||
| (a company registered and incorporated | ||
| in the British Virgin Islands | Claimant | |
| -and- | ||
| BIRD & BIRD LLP | Defendant |
____________________
JOANNA SMITH QC and TIFFANY SCOTT (instructed by Triton Global Limited) appeared on behalf of the Defendant.
____________________
Crown Copyright ©
- This is the trial of a claim by which the claimant claims damages for an alleged breach of contract and/or negligence in connection with the purchase by the claimant ("OHL") from Mr. and Mrs. Plant of a property known as 56 Avenue Road London NW8 ("the property"). The defendants acted as OHL's solicitors in relation to the transaction. The solicitor who handled the transaction on behalf of OHL from 14 October 2010 was Mr Jonathan Baker. The solicitors who acted for Mr. and Mrs. Plant were Magrath LLP and the solicitor who handled the transaction on behalf of Mr. and Mrs. Plant was Ms Georgina Calvey.
- Contracts were exchanged on 10 November 2010, when OHL paid a deposit of £2.575 million to the solicitors acting for Mr and Mrs Plant. Completion was due to take place on 4 April 2011, but, by a notice dated 1 April 2011, OHL, by now represented by Wallace LLP in place of the defendants, served a notice purporting to rescind the contract pursuant to clause 7.1.3 of the standard conditions as amended by the terms of the contract of sale. Proceedings followed between the Plants and OHL in which the Plants sought a declaration that OHL's deposit was forfeit and OHL counterclaimed for the return of its deposit and damages for breach of contract. Those proceedings were due to be tried at a trial starting on 8 July 2013 but were settled the night before trial on the basis that the deposit and all interest that had accrued thereon would be split equally between OHL and the Plants and each side would bear their own costs.
- In these proceedings, OHL seek by way of damages (a) the balance of the deposit, £1,287,500 and interest that has accrued thereon, (b) the cost of proceedings against Mr and Mrs Plant which have been agreed as being £389,235.48, (c) fees totaling £40,000 incurred in connection with the proposed refurbishment works to the property prior to rescission and (d) fees paid to Wallace LLP in relation to the rescinded transaction in the sum of £29,844.28. OHL's case is that the defendants were in breach of duty by failing to discover or inform OHL of the redevelopment of the site of two small schools at 80 Avenue Road, so as to create an academy and specialist school for about 1,400 pupils in total, together with some residential units ("the development").
- The defendants deny liability, contending that they were not under a duty to inform the claimant of the development, even though they were aware of it from a search they carried out of extant planning permissions and applications within a radius of 300 metres of the property, but in any event, the losses claimed were not caused by the alleged breach of duty and/or OHL failed to mitigate its loss by (a) failing to complete on the basis that the development had not diminished the value of the property at exchange to less than the price payable for it under OHL's contract with Mr and Mrs Plant; and/or that the costs of the Plant litigation were unreasonably increased by the failure of OHL to mediate that dispute or offer to settle it at a much earlier stage than immediately prior to trial. Allegations of contributory negligence are also made which I refer to in more detail hereafter.
- The trial took place between the 15th and the 19th and 22 June 2015. I heard oral evidence from Ms Rebecca Chow, a Hong Kong resident and the ultimate beneficial owner of OHL; Mrs. Nicolette Kwok, an old friend and confidante of Ms Chow who introduced the property to Ms Chow; Mr Serota, a solicitor and partner in the firm of Wallace LLP to whom Ms Chow was introduced following the discovery of the development; Mr Golten, a partner in Wedlake Bell and OHL's current solicitor; and Mr Jonathan Baker. The parties intended to call expert evidence but in the end decided that it was not, or was no longer, relevant to any issue that I had to decide.
- One of Ms Chow's closest friends and confidantes is Mrs Nicolette Kwok, whose husband is the chief executive officer of Ms Chow's network of companies. It is not necessary for me to set out in detail what the network of companies consists of and in any event the evidence to enable me to do so is not available. It is sufficient to say that Ms Chow is the ultimate beneficial owner of a number of companies whose assets have been derived from commercial activity principally in Hong Kong and China which has left Ms Chow, and Mr and Mrs Kwok, high net worth individuals. Ms Chow is the godmother to Mr and Mrs Kwok's children.
- For some time prior to deciding to purchase of the property, Ms Chow had been considering purchasing a high value residential property in central London. The properties that she had considered and had made offers for had all been introduced to her by Mrs Kwok. Following a decision to proceed with the property, the defendants were instructed to act on behalf of OHL, a BVI company that was Ms Chow's chosen vehicle for the purchase of the property.
- There is an issue between the parties as to the purpose of the purchase. The defendants maintain that the sole purpose of purchasing the property was for investment, by which is meant purchase followed by refurbishment followed by a sale at a price that provided a substantial capital gain net of the costs of refurbishment and other acquisition and holding costs. The claimant maintains that the property was purchased primarily as a residence for Ms Chow to be used by her following her retirement and until her retirement during her visits to London. That issue is one I resolve later in this judgment.
- The approach that was adopted to the purchase of the property was a fairly short timetable leading to exchange of contracts followed by a more leisurely progression towards completion. The relevant part of the conveyancing process starts with the delivery by Mr Baker to Mr and Mrs Plant's solicitors of a Property Information Form ("PIF"), by which the vendors were asked to supply information about the property. Section 3 of the PIF is entitled "Notices and Proposals". It contains two questions. Those questions and the answers supplied by Mr and Mrs Plant were as follows:
- As will be apparent, question 3.1 asked amongst other things whether:
- Given that question 3.2 was concerned with personal knowledge of the vendor, the answer given on behalf the vendors was either a mistake or an implicit refusal to answer. Although Mr Baker told me, and I accept, that he subjectively considered the answer to be an error rather than a conscious attempt to avoid answering the question, in my judgment it was an answer that ought to have alerted him to the possibility of a problem.
- In any event, Mr Baker informed the vendor's solicitor, Ms Calvey, that the answer to question 3.2 was not satisfactory. Following discussions, the details of which do not matter, Ms Calvey wrote to Mr Baker by email dated 27 October 2010 in these terms:
- The Plansearch report is a proprietary form of search report provided by Jordans. The report included a summary of planning applications of defined types and sizes within the 300 metre radius of the property. It included information that there were two "large" planning applications for sites between 100 and 250 metres of the property. "large" applications were defined as being in respect of developments with an estimated value of in excess of £100,000. There was a plan showing the sites in respect of which permissions had been granted. Those at the school site relevant to the development were shown marked "8" and "46". There then followed a table of various planning permissions identified on the plan. "8" was described as being "new build", and that outline planning permission had been granted in August 2008. The entry also contained the planning reference number. "46" was in similar terms. It is common ground that with this information a search of the local planning authority records would have revealed and ultimately did reveal the full nature of what was proposed. It would also have revealed that detailed planning permission for the development had been granted in September 2010.
- Mr Baker prepared a Report on Title dated 9 November 2010 ("ROT"). At section 7 of the ROT, there was set out a summary of the outcome of the various searches carried out by Mr Baker, including local land charges and local authority searches, drainage and water inquiries, environmental searches, a Chancel repair search and a Land Registry search. There was no mention of the Plansearch report. In relation to "replies to pre contract inquiries", the ROT said simply that:
- Thereafter, Mrs Kwok continued to represent the interests of Ms Chow in relation to the property, principally in relation to issues concerning refurbishment. On 18 January 2011, OHL entered into an agreement with Red Mountain Foundation ("RMF"), an entity controlled by Mrs Kwok whose principal activities had nothing to do with construction refurbishment. In effect RMF agreed that Mrs Kwok would provide an advisory and supervisory service for the refurbishment of the property for a fee of 1 per cent of the total refurbishment costs up to a value as specified in the contract as slightly more than £13 million.
- In March 2011, shortly before completion, Mrs Kwok was introduced by Mr Plant to Mr. Beecham, the owner of a neighbouring property. In the course of the conversation with Mr Beecham, Mrs Kwok learned that it was proposed to redevelop the school site in the manner that I have described. The context of the discussion was what Mr. Beecham maintained was a need to provide security for houses and householders rendered necessary because of the imminent construction of the school.
- Mrs. Kwok was sufficiently concerned to seek help via another friend of hers and was put in contact with Mr Serota, an experienced property and commercial litigation partner in Wallace LLP. The initial focus of Mrs. Kwok was whether the defendants had acted in error. Mr Serota's initial response was set out in an email to Mrs. Kwok of 24 March 2011 and was in these terms:
- Mrs Kwok told Ms Chow of the problem. On 28 March there was an exchange of emails between Ms Chow and Mr Baker. Ms Chow emailed Mr Baker in these terms:
- The idea of obtaining counsel's opinion had originated from Mr Serota. Ms Chow chased the defendant to make these arrangements in an email to Mr Baker of 29 March 2011, which was in response to his of 28 March 2011 set out above. Ms Chow's email was in these terms:
- The defendants instructed leading counsel to advise whether OHL should rescind the sale agreement. Leading counsel's opinion was delivered dated 30 March 2011. The opinion set out questions 3.1 and 3.2 from the PIF, the answers that had been given, the email from Ms Calvey and condition 7.1.1 of the standard conditions as varied by clause 16 of the sale contract. Clause 7.1.1 as varied provided as follows:
- In relation to question 3.1 and the response to it, counsel advised:
- Shortly after this opinion was received, some further material came to light. It would appear that it came to light as the result of a search of public records of the local planning authority by Mrs Kwok's friend who had introduced her to Mr Serota. How it came to Ms Chow is unexplained on the evidence. Inferentially it must have been sent to her by Mrs Kwok, probably under cover of an email or as an email attachment, but that email has not been disclosed. This additional material showed that in August 2008, Mr and Mrs Plant had retained Knight Frank to make representations to the local planning authority concerning the application for outlying permission for the development. It also showed that both Mr Plant and Mr Beecham had been members of a residents' group called "Neighbours of UCL Academy" that had instructed Boisot Waters Cohen, a firm of planning consultants, to make objections to the grant of detailed planning permission for the development. These documents were sent by Ms Chow to Mr Baker by email on 31 March 2011 expressly for onward transmission to leading counsel. These instructions were acted upon and resulted in a supplemental opinion from counsel sent by email on 31 March 2011 in which, in relation to question 3.1 within the PIF, counsel advised:
- Thereafter, Wallace LLP was retained on behalf of OHL in place of the defendants and notice of rescission was given by a letter dated 1 April 2011. The basis on which notice of rescission was given was that the answer to question 3.1 in the PIF was untrue because (i) the Plants had received notice of application for both outline planning permission in 2008 and detailed planning permission in 2010, (ii) the Plants had commissioned Knight Frank to submit a detailed objection on their behalf at outline application stage and (iii) with others, had objected via Boisot Waters Cohen at detailed planning stage.
- The Plants denied that OHL were entitled to rescind. They commenced proceedings in which as I have explained, they claimed to be entitled to forfeit the deposit. OHL, as I have also explained, counterclaimed for the return of the deposit and damages. These proceedings were settled following negotiations that took place very shortly before trial on the terms I referred to earlier.
- These proceedings were commenced on 4 August 2011. OHL alleges that in breach of contract or duty, the defendants failed to inform OHL or Ms Chow that they had obtained the Plansearch report or of its contents or supply a copy of the report to OHL or Ms Chow. It also alleged that in breach of contract and duty, the defendant failed to undertake any investigations as to the nature of any of the developments revealed by the search or ask for instructions as to whether such investigations should take place. OHL's case is that had it been informed of the existence and nature of the development, it would not have entered into the contract of sale with Mr and Mrs Plant.
- By its defence, the defendants denied breach and causation and allege a failure to mitigate and also assert contributory negligence. In relation to breach, their pleaded case is that:
- At the outset of both parties' closing submissions, there were lengthy submissions made concerning the credibility I should attach to the oral evidence of respectively Ms Chow and Mr Baker. This issue matters, as far as I can see, only in relation to the causation issues that I have referred to. I address the question of credibility when I come to consider causation. There is a dispute between the parties as to whether Ms Chow was purchasing the property as an investment in its pure sense or as a residence or both. It is relevant, I think, primarily to credit and causation, and I address that issue when I turn to the causation issue below.
- No authorities were cited to me that were relevant to the breach of duty issue that arises in this case. In general a solicitor is not obliged to undertake investigations that are not expressly or impliedly requested by the client. This proposition was not apparently in dispute between the parties. Whatever Ms Chow's true purpose was in purchasing the property, no specific instructions were given by her concerning her requirements for the property or the investigations that she required the defendants to carry out. That being so, she could not complain if the defendants had insisted simply on a proper answer from the Plants to question 3.2 of the PIF and then advised her to rely on that answer. The defendants did not have either express or implied instructions to go further than that.
- To the general proposition that I started this section of this judgment with, there is however this qualification: if in fact a solicitor acquires information that may be of importance to a client, then it is the duty of the solicitor to bring that information to the attention of the client. Again, this proposition does not appear to be in dispute between the parties.
- I am prepared to accept that the defendants could not be criticised if in fact they had not carried out a Plansearch. This follows from the first of the general propositions set out above. However, having carried out such a search, then in my judgment Mr Baker came under a duty to explain the results of that search to his client. In my judgment this plainly follows from the qualification to the general principle set out above. If, as Mr Baker apparently thought, it was necessary for him to carry out a Plansearch because of the responses that he had received to question 3.2 of the PIF, then it was a breach of duty to say, as was said in paragraph 8 of the ROT, that the information provided did not reveal anything that adversely affects the property. As I have explained, the Plansearch report referred to the existence of planning permissions within the large non-residential categories within 250 metres of the property. There was in my judgment an obligation to include within the ROT a summary of the contents of Plansearch report, given the inclusion of the results of the various other searches within section 7 of the report. When I put this point to Ms Smith in the course of her closing submissions, her response was that Mr Baker had formed the view that the Plansearch report did not indicate anything adverse in relation to the property. In my judgment that was not a position that Mr Baker could reasonably adopt. The report showed the planning permissions to which I referred. The solicitor had not carried out an inspection on the ground nor had he carried out any further research as to what the planning permissions were for. In those circumstances, Mr. Baker was not in a position to form any view concerning the contents of the Plansearch report or whether it might affect the decision of OHL acting by Ms Chow to purchase the property.
- The duty to communicate matters actually known to a solicitor is to communicate information that may be material, thereby setting the threshold for information to be communicated at an intentionally low level. Solicitors do not generally advise on the business merits of transactions they are instructed to facilitate. The business judgments involved are those of the client, not the solicitor, and it is for the client to judge the impact of the material that may be relevant, not the solicitor. Whether the solicitor agrees with the client's judgment, or with the grounds on which it is arrived at, is immaterial.
- Ms Smith urged me to conclude that Mr Baker could reasonably reach the conclusion he did because question 3.2 in the PIF was concerned with planning applications for "nearby" properties and the development was not "nearby" the property. The difficulty about that is that the expression is an imprecise one. The report identified planning permissions for properties within a 300-metre radius. Mr Baker was not able to explain to my satisfaction why it was necessary to further reduce that area in order to arrive at properties that were to be regarded as "nearby", and if it was necessary so to reduce the scope, by how much.
- He then suggested that the only material planning approvals that were relevant were those identified in the text in the summary section of the Plansearch report before the table that set out a summary of all the relevant approvals. Aside from the fact that he didn't advise Ms Chow about even the large development at 64 Avenue Road, the point is without merit because there is nothing within the report that could reasonably lead to the conclusion that the content of the table within the summary could be ignored and attention paid only to what appears in the text. If that had been the intention, then there would have been no point in including the table or any of the detailed material that follows in the report about the material in the table, which included but was not limited to the application referred to in the text appearing above the table.
- I accept Mr Wardell's submission that a reasonably competent solicitor with the Plansearch report to hand would not have unilaterally assumed that only developments within 100 metres were material and the others not. If that approach was to be adopted, then a much more careful and qualitative analysis of the various planning approvals would have to be undertaken. In fact, Mr Baker skim read the report in not much more than a couple of minutes, as he accepted in the evidence recorded at transcript Day 5, page 94, lines 12 and following. He did not undertake any further enquiries of any sort in relation to the information contained in the Plansearch report. Had such enquiries been undertaken, they would have revealed that the development was of at least potential importance as is confirmed by the fact that Mr and Mrs Plant thought the school would be sufficiently intrusive to appoint agents to object to the grant of outline planning permission in 2008 and to do so again as part of a group of residents when detailed planning permission was considered in 2010. Quite simply, Mr Baker was not in a position reasonably to make the judgment he said he made.
- In my judgment Mr. Baker was in breach of his duty by failing to include in the ROT a summary of the effect of the Plansearch report, the further investigations that could be undertaken with the LPA without undue difficulty, cost or delay, and to invite instructions in the light of that summary. By doing so, he would have given Ms Chow the opportunity to decide whether she wished to proceed, withdraw or obtain further information before deciding.
- As I indicated earlier, extensive submissions were made by Ms Smith concerning the credibility of Ms Chow which in the end focus on the assertion made by Ms Chow that she wished to purchase the property for occupation by her when eventually she retired from her business activity. The defendant's case is that Ms Chow's professed desire to live in the property was late invention made for the purpose of bolstering her case on the causation and mitigation issues. Ms Smith's overarching submission was that I should not accord any credibility to Ms Chow's evidence save where it was corroborated, was against her interest or was admitted. Mr Wardell submitted that a number of the points relied upon by Ms Smith as demonstrating that Ms Chow's evidence was unreliable were minor errors, substantively unimportant if not immaterial, contrived and generally not a sound basis for reaching any conclusion concerning Ms Chow's credibility. It is necessary that I reach a conclusion on this submission before turning to causation and then mitigation.
- Before turning to the specific points made by Ms Smith, it is necessary that I explain that Ms Chow gave her oral evidence throughout in Mandarin via an interpreter. The reason for this course being adopted was because whilst Ms Chow was able to communicate in writing in English for business purposes, she maintained that she did not speak English with sufficient proficiency to give evidence or generally as well as she did in writing.
- Given Ms Chow's wide-ranging business interests and her success in the commercial world, that she is based in Hong Kong where English is widely spoken and she was able to communicate with Mrs Kwok at least on occasion by telephone all leads me to conclude that Ms Chow's spoken English is probably better than might have been apparent when she gave evidence. However, I accept that English is not her first language, that she is not anywhere near as proficient in spoken English as she is in Mandarin and that her decision to give evidence in her first language via an interpreter was justified for that reason. It is also fair to say that the interpretation exercise was not as successful as it might have been. This may be because Mandarin is difficult to translate to and from English, a point made in passing by the interpreter on at least one occasion in the course of the evidence and/or a lack of experience on the part of the interpreter in relation to some of the technical words phrases and concepts that arose.
- In my judgment a number of the credibility points that Ms Smith relies on were not attempts to deceive but were the result of linguistic misunderstandings coupled with the inadequacies of the translation process. In my judgment that was the probable explanation, for example, for Ms Chow's evidence concerning the estimated cost of refurbishment contained in the contract that OHL entered into with RMF, by which Mrs Kwok was to supervise refurbishment of the property. It is clear that the figures in the contract are cumulative. Mrs Kwok accepted they were cumulative but Ms Chow did not. Since that position was manifestly unsustainable on the face of the document, since Ms Chow is a shrewd, experienced and successful businessperson, and since there was no real reason for her taking the position that she did, I am convinced that this was the result of a linguistic misunderstanding.
- Another example concerned an email from Mr Baker in which he had advised Ms Chow to obtain a survey or valuation of the property. When asked about that, Ms Chow apparently suggested that this was a reference to another property she had been considering, 19 Upper Brook Street. Since the email concerned referred expressly to the property and was sent at a time when she was no longer interested in 19 Upper Brook Street, this explanation was plainly wrong. Since it was obviously untenable, I consider that evidence was probably the result of linguistic misunderstanding. A similar explanation applies to many of the other inconsistencies identified by Ms Smith in her closing submissions.
- However, that explanation does not apply to Ms Chow's evidence concerning her current intentions concerning the purchase of high value property in London. As Ms Smith submitted, Ms Chow said that she had not purchased another property in London as the agent had not found an appropriate property. Later she conceded that she had not instructed an estate agent. This inconsistency is not one that can be explained away as the result of a misunderstanding.
- I consider that this case is one of those where the safest course is to test the parties' respective cases and the witnesses' oral testimony as far as possible by reference to the contemporaneous documentary evidence and otherwise by reference to inherent probability. I say that because some time has elapsed since the relevant events occurred. I consider this to be the safest course to adopt in relation to Ms Chow's evidence, principally because of the linguistic difficulties I have referred to already. Against that background I now turn to the purpose for which the property was acquired, since that is material to the causation and mitigation issues.
- As I have said, the defendants contend that I should reject OHL's case that the property was purchased for owner occupation by Ms Chow and should conclude that it was purchased exclusively as a business venture. In support of that proposition, the defendants submit that OHL's case on this issue changed radically during the course of this litigation, and that the late amendment of OHL's pleadings demonstrates that this was late invention and that in truth Ms Chow never had the intention of occupying the property. It is necessary therefore that I refer to the relevant parts of the pleadings.
- At the start of this litigation, the defendants raised a CPR Part 18 Request for Further Information. Paragraph 2 of the Particulars of Claim rehearses the agreement in October 2010 to purchase the property, subject to contract. The first Request for Further Information of this paragraph was in these terms:
- In her initial statement in these proceedings, Ms Chow described herself in paragraph 1 of her statement in these terms:
- Mr Wardell submits that it would be wrong to draw an inference of late invention from this material. He points, for example, to the email of 26 May 2010 to the defendants from Ms Chow concerning the proposed purchase of 19 Upper Brook Street. Ms Frampton of the defendants had asked Ms Chow whether the property was to be owner occupied. Ms Chow's response was:
- In my judgment, this last answer is unreal. In context, it was entirely clear that the question posed by the request for further information was designed to elicit an answer as to whether the property was being purchased as an investment property or for residential use by Ms Chow. I am satisfied that the answer given in relation to Upper Brook Street is material only to that property but that in any event the answer is ambiguous. That the property was for the use of Ms Chow begs the question as to the purpose or purposes was it to be used by her. I am entirely satisfied that Ms Chow had no fixed plans for retirement in late 2010 and that she intended her main base of operations to be and to remain in Hong Kong until eventually she chose to retire. The stimulus for her wanting to purchase a high value property in London was, on the balance of probabilities, that such property could be acquired relatively cheaply, renovated and ultimately sold at a substantial profit on or after the recession unwound. I have no doubt that, as long as the property was unsold but renovated, she would have used it when she was in London, but that was incidental to the primary purpose.
- In my view, this analysis is supported by the fact that (a) her trips to London are, and were at all material times at best, sporadic; (b) she did not have any fixed date for retirement in mind down to the date when OHL exchanged contracts or at any time thereafter down to the date when completion was due to take place and; (c) no steps have been taken to purchase an alternative property of the sort I am now considering since the events with which this case is concerned.
- In my view, to that extent, the re-amended RTeply and supplemental statement exaggerate what was intended. This leads me to conclude that I should be cautious before accepting Ms Chow's evidence, save where it is corroborated, admitted or is against her interest, and confirms my view that I should resolve the issues that arise in this case principally by reference to the contemporaneous documentation and the inherent commercial probabilities. I also remind myself that merely because someone has consciously exaggerated one aspect of their case, does not lead necessarily to the conclusion that the rest of their evidence should be rejected out of hand in respect of all other issues. People seek to mislead courts for various reasons including wrongly attempting to bolster a good case that they perceive to be weak. That being so I do not accept that the conclusions I have reached concerning the purpose of purchase issue should cause me to go further than I have identified and thus I do not accept Ms Smith's submission that Mr. Chow's evidence should be rejected in its entirety save where it is corroborated, admitted or his against her interest.
- I now turn to the question of causation. The underlying general principle is not in dispute. If the loss would have arisen even without a breach of duty on the part of the defendant, the claim must necessarily fail. As Sir Christopher Slade put it in Boateng v Hughmans [2002] EWCA Civ 593; [2002] Lloyds Reports PN 449:
- As Ms Smith noted in her submissions, the starting point is to ascertain what the non-negligent solicitor would have done in the particular circumstances. As I have held already, such a solicitor would have included within the ROT a summary of the purpose of the Plansearch report, followed by a summary of the results contained in that report, coupled with a short description of what further information could be obtained if it was required and a request for instructions as to how the recipient of the report wished the solicitor concerned to proceed. Such an approach would have revealed the existing permission for a "large" non-residential development at 80 Avenue Road and that further details could be obtained without undue difficulty, cost or delay by approaching the relevant Local Planning Authority. Alternatively, the issue might have been addressed by saying that a qualified answer to question 3.2 of the PIF had been received and setting out the same basic information.
- The defendant's case is that OHL, acting by Ms Chow, would have proceeded with the transaction even if advice of this sort had been given because, Ms Smith submitted, I should find that Ms Chow did not read the ROT and thus would not have acted any differently than in fact she did. Ms Smith submits that, although in fact Ms Chow insisted on giving notice of rescission when she discovered the true position, the proper analysis of her evidence in relation to that decision was that she did so only because she concluded that she had been misled by Mr and Mrs Plant.
- Ms Smith submitted that I should conclude that Ms Chow would have proceeded regardless, even if the ROT had contained the information that I have held it should have included, because she was dependent on Mrs Kwok for advice and support in relation to the property, that she acted on Mrs Kwok's advice in deciding initially to proceed with the purchase, and because she knew that Avenue Road was a prestigious road with high value properties. It was submitted that, although she was sent the ROT, it is to be inferred that she did not read it, or if she did that she did not understand it, because she ignored the advice contained in paragraph 2.4 of the report to obtain a survey and at paragraph 2.5 to obtain a valuation report. In other words, she was influenced to purchase the property by the advice of her close friend and confidante, and by the fact that the property was located in a high value area and was not influenced by any other factors.
- I do not accept that Ms Chow did not read the ROT. First, as I have said already, Ms Chow had maintained throughout that she is better at reading and writing English than she is in conversing in it. I consider that that evidence is comprehensively corroborated by the body of disclosed material available in this case and, in particular, the emails sent to the defendants and others by Ms Chow. It was not suggested to Ms Chow that these emails had been written on her behalf by others. As I recorded earlier in this judgment, the defendants sent her a copy of the ROT by email. Clearly, they had no reason to think that Ms Chow could not read the ROT at that stage or they would have arranged for it to be translated or would have indicated that it should be translated or considered on her behalf by a Hong Kong based solicitor who was bilingual. Ms Chow responded to this email by saying that, "everything is fine with me". She added, in relation to a revised form of contract that, "the new version of the agreement is also accepted". That makes clear that her response of, "everything is fine with me", meant that she was happy to exchange, having considered the ROT.
- If and to the extent that it is suggested that she would not have read the ROT even if she could have read it, I reject that suggestion. There is nothing that supports the contention that this very shrewd and experienced business woman would adopt such a cavalier approach to what was the investment of a considerable part of her personal fortune. In my judgment, this conclusion is entirely consistent with Ms Chow's experience in the property sector, which she refers to in paragraph 1 of her initial statement, when she says that she was a property investor and that she owned, managed and operated a number of property investment companies. People in that position do not fail to read documents like Reports on Title. I do not accept it can be inferred from the fact that she did not act on advice from the defendants to obtain a survey and a valuation that she did not read the report or would have ignored the sort of advice that should have been but was not given in it concerning the contents of the Plansearch report. The one simply does not follow from the other.
- The more difficult question to resolve is how Ms Chow might have reacted if she had been told about the issue. At paragraph 33 of her witness statement Ms Chow says:
- I am satisfied that the reaction of Ms Chow would have been the same in 2010 as it was in 2011. She would almost certainly have consulted Mrs Kwok and I have no reason to suppose that Mrs. Kwok's reaction would have been any different in 2010 than it was in 2011. More importantly, this submission proceeds on the basis that Ms Chow could not rationally have decided not to proceed without valuation advice and that, had she taken such advice, it would probably have been that the development would not diminish the value of the property below the price she had agreed to pay subject to contract. In my judgment, this approach is misplaced.
- In 2010, Ms Chow was about to spend in excess of £25 million on a single property in the expectation that she would be spending a sum then estimated at about £4 million on refurbishment. Even on the basis that this was a commercial investment, she was fully entitled to the view that the development was an adverse factor that militated against proceeding. Merely because a valuer says that the price agreed reflected the present value of the property taking account of the school is not the point. It is far more difficult to say what the effect of such a development would be on the future value of the property after refurbishment, or on the ease with which it could be sold, particularly in a small market for high value residential properties, both of which factors are highly material where property is being purchased as an investment for capital gain purposes. Ms Chow was entitled to decide that the development altered the risk profile presented by the acquisition and refurbishment of the property.
- I do not consider the fact that Ms Chow explained her decision to rescind by reference to her being defrauded, or words to that effect, as having an adverse impact on the causation issue either. She would not have rescinded, and could not rationally rescind, simply because of an allegedly fraudulent misrepresentation by Mr and Mrs Plant, unless she also considered it likely that the development would have an impact that was adverse. I fully accept that Mrs Kwok was not qualified to express a view of the impact of the school development on the present value of the property, but Ms Chow knew that perfectly well. She was experienced in the property investment world and she considered the effect of the development on her acquisition to be adverse. Whatever else can be said of Ms Chow, it is clear that she is an experienced, shrewd, resourceful and successful businesswoman. Whilst it is a matter of impression, I record that there was nothing in the manner in which she gave her evidence or in the answers that she gave or the tone that she adopted when giving them that suggested to me that Ms Chow was someone who reacted emotionally or irrationally in commercial or high stress situations. In my judgment it is highly unlikely that Ms Chow would have rescinded simply because of an emotional reaction to an allegedly untruthful representation on the part of Mr and Mrs Plant, unless she also judged the untruthfulness to have a material impact on her plans for the property, particularly when she had been advised that rescission carried with it the risk of losing the whole of the deposit if it failed.
- In any event, the premise of this submission is that Ms Chow's concern that she had been misled would not have applied in 2010. Whilst the facts would have been different, I do not accept that to be so. The ROT followed the PIF, which contained the misleading answer, and that it was misleading came to light in 2011 once the existence of the development became known. The objection letters were freely available on the public records maintained by the Local Planning Authority. That material would only not have come to light in 2010 if Ms Chow had been properly advised if she decided either to proceed notwithstanding such advice, or to withdraw without further enquiry. Given Ms Chow's reaction in 2011, and given that I do not think her reaction was irrational, emotional or over-informed by Mrs Kwok's views as to the effect of the development on the then value of the property, I think she would have either withdrawn from the purchase at that point -- something that the Plants no doubt feared might be the result -- or would have instructed the defendants to make further enquiries, which would, of course, have revealed the material Mr Serota and Mrs Kwok's friend found on the files of the LPA.
- Ms Smith submitted that Ms Chow was keen to purchase because her various attempts to purchase other properties had ended in failure. So she was but, again, that misses the point. Her keenness to purchase was predicated on the property being a sound investment for acquisition, refurbishment and subsequent sale. If information had come to her attention in 2010 that led her to conclude that it was not or might not be, then she would have changed her mind. After all, she was sufficiently unsettled to proceed with rescission in 2011 even though she was advised that the course was a risky one, as I have described. It is all the more likely in my judgment that she would have withdrawn at a time when she was able to withdraw without financial risk.
- It was said that, when she was considering another property in Avenue Road, Mrs Kwok became aware of the school then on the school development site. That was so. Again, it is not the point. Even assuming that she was able to recall and did recall that to be so, the noise and risk posed by a small school with about 100 odd pupils that had been established for many years in the area was one thing; a plan to demolish that school and replace it with an academy for 1100 odd pupils and a special needs school for a further approximately 150 pupils is entirely different.
- It was submitted that security was a nonexistent issue, invented after the event for the purpose of making the case on causation stronger, because the property was, in truth, in close proximity to the residents of the Israeli Ambassador to the Court of St James, and that residence had 24-hour armed police guards. In my judgment these points are both unmeritorious. First as to security, it is not surprising that Ms Chow had not mentioned in before 2011. It was not an issue before then. It only became an issue when Mr. Beecham indentified security as something householders would have to provide for, or consider providing for, as a result of the development in the course of his conversation with Ms Kwok. The police presence outside the Israeli ambassador's residence in also immaterial to this issue. That point was known to Mr Beecham, for example, yet security was precisely the issue that caused him to speak to Mrs Kwok and to reveal the existence for the plans for the construction of the academy. If the point was of concern to established residents, I do not see how it could properly be said it could not be of any concern to Ms Chow simply because she did not mention it as an issue at any time prior to her learning about the development.
- The final general point made by Ms Smith is that it is to be inferred from the overall impression given by Ms Chow that she was someone not sufficiently engaged with the process to be concerned with details such as that which, on this hypothesis, would have appeared in the ROT. I think that is an oversimplification. It is clear that, where the commercial essentials of the scheme were concerned, Ms Chow was fully engaged in the process. That is shown, for example, by her concern to try and incorporate into the contract provisions in her favour which she was familiar with as a feature of Hong Kong conveyancing and her express approval of the revised form of contract by her email in response to that from the defendants attaching the ROT. The reality is that, if the ROT had contained the information that it should have contained, Ms Chow would have engaged with it because of its potential impact on the commercial essentials of the project.
- There is one final point that is highly material to the causation issue. It is this: in her email to Mr Baker of 29 March 2011 referred to earlier, Ms Chow had said in terms:
- It is not suggested that, in 2011, there was any other reason for her wishing to withdraw from the contract, other than the point that she had been misled by Mr and Mrs Plant in relation to the effect of the proposed development. There is no question that the funds to complete were available. Indeed, the claimant transferred the funds necessary to complete to the defendants as the development issue was unfolding. I am satisfied, therefore, that OHL has established the causal link necessary to maintain its claim in damages for breach of duty against the defendants.
- There are two points concerning mitigation made by the defendants. The first is that OHL failed to mitigate its loss by completing the transaction. The second is that it failed to mitigate the costs of the Plant proceedings by mediating the dispute at an early stage.
- The duty to mitigate is a duty not to expose a contract breaker or tortfeasor to additional expense by reason of the claimants not doing that what they ought reasonably to have done - see British Westinghouse Electric and Manufacturing Company Limited v Underground Electric Railways Company [1912] AC 673 per Viscount Haldane at 689. As Lord Haldane makes clear, however, that principle is a qualified one for it:
- In my judgment the notion that Ms Chow was required by the mitigation principle to complete the purchase of the property by paying the balance of the purchase price of in excess of £22 million when in her judgment the transaction was no longer commercially attractive is unsustainable. It depends for its force on the suggestion that before deciding to rescind Ms Chow should have commissioned a valuation of the property in order to ascertain whether the property was worth the price that she was due to pay for it, taking account of any blight caused to it by the development. That is unreal in my judgment for the following reasons.
- The problem first surfaced about a week before completion was due. It is unreal to suppose that a formal valuation could have been obtained in that time. It is equally unreal to suppose that the present value of a property that on the defendant's own case was being purchased as an investment to be refurbished and then sold on at a date to be fixed in the future was the sole consideration in deciding whether to proceed. I have discussed this issue already in relation to the causation issue.
- It was then submitted that it was unreasonable to rescind because cautious advice had been given about OHL's ability successfully to rescind the contract. In my judgment, this submission lacks reality for precisely the reasons identified by Lord Macmillan in Banco de Portugal cited earlier in this judgment. Ms Chow had been placed in a difficult position as a result of the defendant's breach of duty. She was faced with the prospect of having to decide to proceed with what, even for Ms Chow, was a very substantial investment involving a substantial portion of her personal fortune in circumstances where she did not want to proceed and would not have proceeded if she had known the true position, or rescinding the agreement notwithstanding legal advice that she might lose the deposit as a result. In those circumstances I do not accept that the duty to mitigate was one which required OHL to proceed with the purchase simply because that would have been less burdensome for the defendants.
- Ms Smith returned more than once to the point that Ms Chow should not have decided to rescind without taking valuation advice. Aside from the timing points I have already made, in my judgment this point ignores the fact that this was not about purchasing a property at what might be an overvalue. This was about buying a property that was to be refurbished and ultimately sold on. If the defendants are right in saying that the purchase was for investment purposes, as I have concluded was primarily the case, then Ms Chow was fully entitled to make her own business judgment, particularly given the limited window of opportunity to decide, and that the defendant did not suggest that she take valuation advice before deciding whether to proceed or not.
- I now turn to the other aspect of the mitigation argument - that is that OHL failed to act reasonably by seeking to mediate the claims between OHL and Mrs Plant before trial.
- It is perhaps necessary to remember that defending Mr and Mrs Plant's claim that the deposit was forfeit and counterclaiming for the return of the deposit was a step that mitigated the losses for which the defendant would otherwise be liable. Thus, on the usual principles identified by Lord Haldane in the Westinghouse case quoted already, OHL would be entitled to recover as part of its damages the costs of those proceedings.
- There can be no doubt that the defence and counterclaim in the Plant proceedings was an appropriate step to take. Its effect was to reduce the claim in these proceedings in respect of the deposit alone by in excess of £1 million. Nonetheless, the defendants submit that OHL acted unreasonably in not exploring settlement until the eve of trial. It is common ground that neither party in the Plant proceedings thought that a mediation prior to the exchange of witness statements was an appropriate step to take. It is contended therefore that OHL acted unreasonably in not seeking mediation shortly thereafter and in consequence the fees incurred after the end of April should be held irrecoverable as damages against the defendants. In my judgment, this submission must be rejected for the following reasons.
- When and on what basis an approach is made by a party to mediate is a judgment call. It is a judgment to which the principle identified by Lord Macmillan in Banco de Portugal applies with full force. Having embarked on litigation to mitigate the losses for which the defendants would otherwise be liable, it is not open to the defendants then to second guess the judgment of the claimant's advisers after the event as to how they should have conducted the litigation other than perhaps in very clear and obvious circumstances. Had it been the case that OHL was refusing to mediate in the face of advice from its solicitors that it should do, or perhaps if it could be shown that there was an outright refusal to mediate from an early stage in the litigation, then the failure to mediate might constitute a breach of the duty to mitigate. However, there is no evidence that OHL was refusing to take the advice it was given from its' solicitors or that OHL's solicitors were refusing outright to mediate. Notwithstanding that in the end the case was settled with relative ease, the correspondence after the exchange of witness statements did not suggest that this was likely. In any event the window of opportunity for mediation was a narrow one given the agreement of both parties that mediation was inappropriate until after the exchange of witness statements.
- In order to make good these conclusions, it is necessary that I refer to some of the inter-solicitor correspondence. On 9 May 2013, Wedlake Bell (OHL's solicitors) had written two letters to Clyde & Co (the Plants' litigation solicitors). In the first, open, letter they had said:
- On the same date, OHL's solicitors made a part 36 offer by which OHL offered to settle for the full value of its claim and to forego its claim to interest. Whilst I accept that of itself the fact that a party considers its case a strong one is not a legally justifiable reason for refusing to mediate. However the position is much less clear cut if a party considers its case is a strong one, mediation has been delayed by agreement of all parties until a very late stage in the litigation process and that the prospects of success of the mediation are too low to justify the cost and inconvenience of embarking on a mediation process, particularly very close to the date when the trial is due to commence when inevitably mediation will divert attention from preparation for trial.
- Clyde & Co responded to this correspondence by a letter dated 6 June 2013 in which they set out in great detail what they perceived to be the weaknesses of OHL's case. However, in that letter Clyde said this concerning mediation:
- Two things emerge from this correspondence in my judgment. First, each of the firms concerned was asserting the strength of their respective clients' case in correspondence. Mr Golten had described this as posturing and to an extent it was. However, the point that emerges, even at this stage, was that Clydes considers OHL's case to be weak and had not made an offer to settle. In my judgment Wedlake Bell were entitled to conclude on the basis of Clydes' correspondence that the prospects of a satisfactory settlement at mediation were low and that no useful purpose would be served by it in those circumstances, particularly given the proximity of the trial, at any rate in the absence of it being attended by the respective conveyancing solicitors' insurers. Plainly, there was a real prospect that either the solicitors acting for the Plants in the transaction, Magraths, or for OHL, the defendants, would end up meeting at least part of the claim, depending on how the Plant litigation was resolved. In those circumstances the presence of Magraths' insurer and the defendant's insurers at any mediation would enhance dramatically the prospects of settlement. OHL's solicitors' proposal in their letter of 18 June represented a realistic mechanism for attempting to resolve the dispute in the particulars circumstances of that case.
- Clyde responded to OHL's solicitors' letter of 18 June by a letter of 21 June 2013. In relation to mediation, they said this at paragraph 2.9:
- In my judgment that was, with due respect, an unfair summary of the Clydes' position. Clydes had merely asserted their belief that Magraths' solicitor and insurer could not be ready for a mediation before the trial in the Plant proceedings that was due to commence on 8 July 2013.
- By 1 July the position as described by Clydes in their letter of that date was:
- In my judgment this correspondence does not disclose any undue delay on the part of OHL's solicitors in their approach to the mediation process. The only questionable element was their insistence that Magraths' insurers be present. In my judgment the fact that OHL and its solicitors considered its case to be a strong one was not a good reason for refusing to mediate and was not of itself the basis on which in fact it refused to mediate. Initially Wedlake Bell suggested that agreement ought to be reached as to one part of the claim and mediation as to the balance, but by 18 June 2013 they had offered to mediate, but on the basis that all relevant parties were present. This was not sufficiently unreasonable conduct by OHL's solicitors to constitute a failure to mitigate in my judgment, particularly when considered in light the principle identified in Banco de Portugal and of (1) the robust line Clyde were taking as to their client's case, (2) the absence of any part 36 offer by Clyde, (3) the proximity of trial and (4) Wedlake Bells' belief that OHL's case was a strong one.
- These factors were ones that OHL's solicitors were entitled to take into account in suggesting the approach to be adopted, and in my judgment, whatever the position might have been in relation to the litigation in which this conduct was taking place, it is very difficult to suggest that this constitutes a failure to mitigate tested against the principles as described above.
- Whilst it was apparent that at least a tripartite mediation could take place by no later than 25 June 2013, that was only about two weeks from trial. Given the proximity of trial, in my judgment, OHL's solicitors were entitled to invite an offer to settle from Clydes in the alternative and this they did expressly on 3 July 2013. It was of course open to Clydes to make any offer that they considered appropriate prior to that. The truth is that no offer was forthcoming in response even to the express request made on 3 July 2013. In the end an offer was made by Clydes to settle which was accepted but not in response to that letter.
- In my judgment in these circumstances it is difficult to conclude from this chain of events that OHL had failed to mitigate by refusing to mediate. There was only ever a window of opportunity for mediation of about two months between the exchange of witness statements and the commencement of the trial in which Clydes were prepared to consider mediating at all. OHL's solicitors made a part 36 offer coupled with a detailed explanation of their belief that OHL would succeed. Clydes responded with a lengthy critique which suggested very strongly that they had reached the conclusion that the Plants were likely to succeed, particularly given that no counter-offer was made. The case is one which turned very largely on legal interpretation.
- Thereafter, OHL's solicitors suggested mediation involving insurers for the respective parties' conveyancing solicitors. That position was reasonable, given the failure of Clydes to make an offer to settle. Whilst OHL's solicitors might be criticised for not agreeing a tripartite mediation, that refusal was made only on 25 June by which time the parties were close to trial. No offer had ever been made by Clydes and was not until the eve of the trial, notwithstanding that they were expressly invited to do so, as I have said by the letter of 3 July. There is no evidence that it would have been possible to arrange a mediation between 21 June and the start of the trial on 8 July.
- More importantly there is no evidence that if a tripartite mediation involving the Plants, OHL and the defendants in these proceedings, that a settlement would have been probable. As I have said, Clydes were robustly asserting their client's defence and had not made an offer of any sort. It is not suggested that the defendant's solicitors would have made an offer either. In those circumstances I am not able to accept the defendant's case that OHL should not recover part of its costs after the end of April 2013 on the basis that it failed to mitigate its loss appropriately.
- The only issue that remains is that of contributory negligence. In my judgment that plea fails too. Ms Smith submitted that if a valuation had been obtained, that then any adverse effect of the development on the property would have come to light. However, there is no evidence that a valuer would have identified the existence of the development and in any event, the impact of the development on the present value of the property that was to be purchased, refurbished and sold on at some unfixed future date is at best only part of the issue. There is nothing in the evidence that suggests Ms Chow ought reasonably to have anticipated that a valuer would have ascertained the existence of the development. This was all the more the case when the terms of the defendant's advice to obtain a valuation report contained in the ROT is borne in mind. Paragraph 2.5 of the ROT says:
- In the result, therefore, this claim succeeds, and I invite submissions from the parties as to the amount for which judgment should be entered, together with interest, having regard to the fact as I understand it, all sums claimed in these proceedings are now agreed sums.
HIS HONOUR JUDGE PELLING QC:
Introduction
Background
"3.1. Have any notices or correspondence been received or sent e.g. from or to a neighbour council or government department, or any negotiations or discussions taken place which affect the property or property nearby? If yes, please give details."
The answer required in the first instance was a tick of either a box marked "yes" or a box marked "no". The box marked "no" was ticked by or on behalf of Mr. and Mrs. Plant. Question 3.2 was to the following effect:
"Is the seller aware of any proposals to develop property or land nearby or of any proposals to make alterations to buildings nearby? If yes, please give details."
There was again a box marked "yes" and a box marked "no", neither of which were ticked by or on behalf of Mr. and Mrs. Plant, but instead a narrative answer was given to this effect: "Please make your own inquiries."
"... any ... correspondence [had] been ... sent ... to a ... council ... department ... which affected the property or a property nearby ..."
As will be equally apparent, question 3.2 was concerned with the personal knowledge of the vendors of proposals to develop property or land "nearby" the property. It did not ask for details of all such proposals, only those known to the vendors.
"Jonathan,
Further to our conversation earlier I attach the draft contract with my amendments.
Provided the completion date of 4 April 2011 is agreed, my clients will agree to:
(1) the deposit being held as stakeholder and for interest to be paid to your client except where they are in default;
(2) a deduction in the purchase price of 1 per cent if our clients are in default and completion takes place after 6 April 2011.
I attach the extract from the Finance Act 2010, an HMRC bulletin regarding payment of SDLT at 5 per cent.
As discussed, given the nature of the area, the planning question is too wide, which is why we advised to carry out a Plansearch which will reveal all the planning applications in the area.
There are several ongoing developments on Avenue Road which are obvious on inspection. Our clients are not aware of any proposals to develop the immediate neighbouring homes..." (Emphasis supplied)
The only part of the email that attempted to answer question 3.2 was the underlined sentence, which was not in fact an answer to question 3.2 because it was confined in its scope to "immediate neighbouring homes". Mr Baker could have insisted on the vendors providing an answer to question 3.2. In fact he accepted the answer given and carried out a "Plansearch" as suggested by Ms Calvey. Mr Baker told me, and I accept that he had not previously carried out such a search, that it was not a search that was usual, and that he did it only because he thought it was necessary in light of Ms Calvey's letter. That search resulted in a report ("Plansearch report"), which it is accepted was received and read by Mr. Baker prior to the preparation by him of the Report on Title sent to OHL.
"The information provided by the seller in their replies to our pre contract inquiries did not reveal anything that adversely affects the property."
Under the heading, "Planning", no information was provided other than in relation to the property itself. Mr Baker sent the ROT to Ms Chow by email dated 9 November 2010. In the same email he said that he had received the results of a local authority search "which does not reveal anything adverse". Mr Baker did not disclose the existence of the plan search report nor did he summarise its contents either in the ROT or otherwise prior to exchange. By an email dated 10 November 2010, Ms Chow replied to Mr. Baker's email of 9 November 2010 in these terms:
"Thanks for your email. Everything is fine to me, please do on my behalf proceed to exchange of contracts today. The new version of the agreement is also accepted."
Later that day, contracts were exchanged and the deposit of 2.575 million was paid.
"The local authority search would not have revealed the planning permission for the school. However, the information provided by the seller before exchange of contracts would normally refer to any notices received in respect of nearby development. The local authority website shows that details of the application for planning permission were sent to 56 Avenue Road. If the sellers did not disclose this in their pre-contract information, this might enable a claim to be made against the sellers for misrepresentation. I need to see the pre contract information provided by the sellers..."
"Is there any news on that issue 'school'?
I will arrange the funds in two transfers for value on 30th, one GBP 21 million from my investment account with Merrill Lynch and the balance direct from [OHL].
I would be much appreciated if you can clarify this issue before transfer the funds to the seller.
Thanks for your prompt attention ..."
Mr Baker replied (sending a copy of his reply to Mrs.Kwok), also on 28 March, in these terms:
"Further to your email below and my telephone conversation on Friday with Nicolette, we have looked at our papers and I attach a copy of Jordans' Plansearch Plus report dated 28 October 2010. You will note that this refers to a planning application/permission for a development at 80 Avenue Road. Given that we have not previously sent this report to you, you may feel that you would wish to take independent legal advice on the matter. Please let me know.
Nicolette has asked us to obtain counsel's opinion on the extent to which the contract for the purchase of the property could be rescinded by reason of the non-disclosure/misrepresentation on the part of the sellers. We have lined up a QC to look at this tomorrow and please confirm we should proceed with this ..."
On 29 March 2011, Mrs Kwok emailed Ms Chow in these terms:
"Dear Rebecca,
I was copied in on an email from your lawyer Jonathan who told you that he had the property survey done that revealed that there was going to be a large school at 80 Avenue Road. Unfortunately, he forgot to pass these results on to you when he received them on 28 October of last year.
This is of course going to have huge repercussions on the value of your investment and I think it would be best to seek urgent advice from a very good property lawyer, as I don't think I can help you any further.
A friend of mine gave me the name and email details of a very sharp lawyer. His name is Simon Serota..."
"Further to your email in which you suggest we appoint counsel's opinion on the extent to which the contract for the purchase of the property could be rescinded by reason of the non-disclosure/misrepresentation on the part of the sellers.
Please ask a QC to look at this ASAP keeping in mind completion date is in 3 days.
In the meantime I am taking independent legal advice on action against Bird & Bird for omitting to send me the report by Jordans, Plansearch Plus.
I am sure I would not have entered into the purchase agreement if I had known that there was going to be a school for 1,250 pupils and 250 staffs in the same block as my property. Needless to say that this development has a huge impact on the value of my investment."
This email was followed by another from Ms Chow to the defendants, again dated 29 March 2011, which was in these terms:
"I have studied my case and would like you to send an urgent letter to the sellers' legal representative to rescind the sale since the seller has withheld the information regarding the planning permission for the school at 80 Avenue Road.
I believe this rescinding is justified.
For your information full funds will be valued to your account tomorrow, 30th, but are not to be released before we have a clear feedback from the seller.
I would be grateful if you could email as well as courier a hard copy of this letter over to the seller this evening ..."
The defendants did not act on these instructions. Neither at this stage nor at any time thereafter did the defendants advise OHL to obtain valuation advice before attempting to rescind in order to ascertain whether the development had diminished the value of the property beneath the price that had been agreed subject to contract.
"7.1.1. If any plan or statement in the contract or in written replies which the seller's conveyancer has given to any written enquiry raised by the buyer's conveyancer before the date of the contract is or was misleading or inaccurate due to any error or omission, the remedies available are as follows.
7.1.2 When there is a material difference between the description or value of the property or any of the chattels included in the contract as represented ... the buyer is entitled to damages.
7.1.3. An error or omission only entitles the buyer to rescind the contract
(a) where it results from fraud or recklessness or
(b) where he will be obliged to his prejudice to accept property differing substantially in quantity, quality or tenure from what the error or omission had led him to expect.
7.2 Rescission.
If either party rescinds the contract
(a) Unless the rescission is the result of the buyer's breach of contract, the deposit is to be repaid to the buyer with accrued interest;
(b) The buyer is to return any documents he received from the seller and is to cancel any registration of the contract."
"5.2 There is an evidential difficulty here. Although it would seem very likely that notices would have been received at the property, there is currently no hard evidence of this. It is therefore the case that rescission on the basis of an alleged misrepresentation here would involve a gamble. If no notices had been received, then there would have been no misrepresentation. In other words, in order to be sure, evidence needs to be obtained to the effect that a notice regarding the development was sent to the property. In addition, there is also the same uncertainties in relation to 3.2 regarding the reference to the word 'nearby' to which I have already alluded..."
In relation to Ms Calvey's email, counsel's advice was:
"On analysis of the information given in the letter of 27 October 2010, I do not think there is any misrepresentation on the part of the sellers. The sellers made it clear in the response that they were referring to immediate neighbouring houses in answering the question, and I think this means that they were not taken to have made any inaccurate statements regarding 80 Avenue Road."
Counsel's advice was that rescission would be difficult and risky for three reasons identified in paragraphs 9.1 and 9.2 of her opinion in these terms:
"The first is the point to which I have already alluded above, namely the lack of any clear representation. There is ambiguity in the responses which were couched in terms of 'nearby' property and there is no evidence that a notice regarding the development at 80 Avenue Road was sent to the property. It is therefore not possible to currently point to any definite misrepresentation by the sellers.
9.1.2. Secondly, it is clear from condition 7.1.3 ... this means it will have to be proven by objective expert evidence that even if there was an error made in the reply stated in the property information form, that this has resulted in the property being substantially different in quality from that which the error had led the buyer to expect. In overall terms it would be very difficult to establish this unless it can be shown that there is a very significant difference in the value of the property caused by the development at 80 Avenue Road. This is a matter for a valuer to provide an opinion upon rather than a barrister, but nevertheless my immediate reaction is that I fear that this will be a high obstacle to jump.
9.2. Furthermore, where a buyer purports to rescind but it subsequently transpires that this was a wrongful rescission, this usually means the buyer will have acted in breach of contract by not completing on the contractual completion date. The effect of this is that the buyer will lose the deposit which has been paid and will be liable to pay damages for failure to complete, in order to compensate the seller for the losses he experiences as a result of the sale going on."
"1. The objection substantially increases the prospects of showing that question 3.1 was not answered truthfully as the natural inference is that the objection on behalf of the Plants was sent after notice of the application. There is still the point about whether 80 Avenue Road is 'nearby'. However, it would appear that the Plants treated 80 Avenue Road as being 'nearby' in relation to the planning position, and this would make it harder for them to contend that it was not 'nearby' for the purpose of the questions in the property information form.
2. In relation to question 3.2, the answer was carefully worded in the letter of 27 October 2010 in that it made no representations relating to 80 Avenue Road. As pointed out, the reference was only to 'immediate neighbouring homes' which would not apply to a school. In relation to the reference to development on inspection, I do not think that this can be construed as a representation relating to 80 Avenue Road, principally because it is too general. I don't think the information therefore takes the matter forward on question 3.2..."
"There is nothing in the plan search that could or should have alerted the defendant to the possibility that any of the numerous planning applications listed might have any material impact on the property or be of concern to the claimant. There was nothing within the content of the plan search that the defendant was under a duty to bring to the attention of the claimant and it was no part of the defendant's duty to carry out investigations into the nature of any of the various planning applications and permissions listed in the plan search nor to ask the claimant for instructions whether or not to do so."
In relation to causation the defendants plead:
"8.3 The claimant was intent on purchasing the property and was clearly prepared to do so irrespective of any defects that might have been revealed on a survey or any matters affecting its value that might have been revealed in the course of investigations undertaken on its behalf, whether by a valuer or otherwise. As Ms Chow emphasised in an email to Mr Baker dated 27 October 2010:
"'I am worried the owner will sell their property if someone offers them the highest price. I only want the guarantee to get this property.'
8.4. There was nothing in the information provided in the plan search in respect of any of the numerous planning applications listed to suggest that any of them would have any impact whatsoever on the property.
8.5. Had the claimant had sight of the plan search or been advised to consider investigating the matters it contained, it would not have taken any further action but would simply have proceeded with the transaction in any event."
and at paragraph 14.1 of the defence, it is pleaded that:
"The claimant is put to strict proof of the allegation that it would not have contracted to purchase the property but for the alleged breach. As stated above, the claimant was intent on purchasing the property and was prepared to do so without obtaining any advice from a surveyor or valuer as to possible defects or other matters that might affect the value of the property. It would have proceeded with the purchase regardless of knowledge of the content of the plan search."
In relation to the failure to mitigate, the defendants assert at paragraphs 15 and 15(a) of their defence:
"In refusing to complete the purchase and as a result losing the deposit of £2,575,000 and not proceeding with the renovation works for which it alleges it had paid fees of £40,000, the claimant has failed to mitigate its alleged losses. The action it has taken is wholly unreasonable. The reasonable and proportionate course to take in all the circumstances was to complete the purchase.
15(a). In all the circumstances it was unreasonable for the claimant to incur substantial cost eventually approaching £450,000 in connection with the Plant action. Alternatively, it was unreasonable not to compromise that action until the evening before the trial was due to commence."
The defendant's case as to contributory negligence is pleaded in paragraph 16 of the defence, which is in these terms:
"... the claimant itself contributed to the alleged loss and damage by its own negligence. The claimant was advised to obtain a survey and a valuation in respect of the property but ignored that advice. Had a valuation been obtained, it would or should have addressed matters of public record affecting the value of the property. If the development had in fact had any impact on the amenity and value of the property, which is denied, this would have been revealed before contracts were exchanged."
Breach of Duty
Causation
"Please confirm that the purpose for which the claimant was purchasing the property was as an investment. If not, please state for what purpose the property was to be purchased."
The response was in these terms:
"The claimant was purchasing the property as an investment."
"I am a property investor and I own, manage and operate a number of property investment companies."
and she described OHL as having been:
"... established for the purpose of holding property acquired for investment purposes in England."
In her first statement Ms Chow did not suggest that the impact of the development would affect her enjoyment of the property as a residence. She said merely that:
"On Thursday, 24 March 2011, Mrs Kwok telephoned me to ask me if I was aware that a school was being developed close to the property. She told me that the school was being developed to accommodate 1,500 students in a six storey building, the development. I was not aware of this at the time and I was extremely concerned upon hearing this news as to the impact this would have on the property. I was shocked and believed this would have a negative impact on the property. I learned that the development was to have four entrances and I was concerned about noise and the security of the property. I would not have proceeded with the purchase of the property on behalf of Orientfield if I had known about the development before contracts were exchanged."
The first express reference in the pleadings to Ms Chow intending to reside at the property came with the re-amendment to the Reply for which permission was given on 11 May 2015. Her case on this issue was developed in detail in her supplemental statement where she said this at paragraphs 7 and 8:
"I am 66 years old and the intention was to acquire a property close to my godchildren. They would in fact have had their own rooms within the property and decorated them as they chose in a peaceful environment which I could use as a home when visiting London. Indeed, my refurbishment plans were very much geared to transferring the property into a lovely home where the children and I could spend good times together during my lifetime. My concern was with what I thought would be the effect of the school development on the amenity of the house and area. To be blunt I did not want to have a house near a large school. If I had known about the development, I would not have made an offer for the house, let alone exchanged contracts on it. I doubt whether Nicolette Kwok would have even told me about the property if she had known of the development as she would have known that it did not suit my requirements."
"The property at 19 Upper Brook Street is for my own use."
Mr Wardell submits that although this was admittedly an answer in relation to a different property, it was, as he put it in his closing submissions, "... a contemporaneous answer before any acquisition, which is plainly and obviously true". In relation to the pleading point, he maintains that the reference to "investment" was ambiguous, in the sense that all real property is bought as an investment, whether or not it is intended to live in it or not.
"It is by now trite law that it does not suffice for a claimant who seeks to recover substantial damages arising out of his solicitors' failure to give him proper advice as to the risks of a proposed transaction to show that such failure occurred and that he suffered loss under the transaction. In such a case, it cannot be presumed that the negligent solicitor caused the loss. The claimant has to prove a connection, sometimes called a 'causal link', between the negligence and the loss which justifies making the solicitor pay substantial damages. Simple logic requires that, to show such causal link, he must first satisfy the court as to what action, if any, he would have taken to avoid the loss if proper advice had been given. If he fails to satisfy the court on this point, he can recover no more than nominal damages. Even if he satisfies the court that, in the events which happened, the loss would have been avoided if relevant advice had been given, the court will still have to decide whether the loss suffered was in fact caused by the failure to give such advice."
"I am now aware of the development of a school at 80 Avenue Road. If I had known of the proposed development at 80 Avenue Road prior to exchange I would not have proceeded. I would have been concerned that a school of the proposed size would have a negative impact on the property in terms of noise and security."
At paragraph 50 of the same statement, she said:
"I was shocked and believed that this would have a negative impact on the property. I learned the development was to have four entrances and I was concerned about noise and the security of the property. I would not have proceeded with the purchase of the property on behalf of Orientfield if I had known about the development before contracts were exchanged."
At paragraph 61 in the same statement she said:
"Had I known of the proposed development I would never have entered into the contract in the first place. Had the report and its contents been properly explained to me I would have instructed Bird & Bird to investigate further and to find out what the proposed development comprised. I have no doubt that they would quickly have been able to discover the position and that there had been objections from local residents, not least from the Plants."
The point made by the defendants is that all of this is inherently improbable because this was an investment decision and there was no evidence available to Ms Chow that suggested the value of the property was less than its purchase price by reason of the development. It remains the case that there is no evidence of any diminution of this sort. In fact, the property was sold some years after the events I am now concerned with at a significantly greater price than that which was to be paid by OHL to Mr and Mrs Plant. Ms Smith submitted that the points made concerning security and noise is after the event reconstruction. At no stage prior to the discovery of the school development, had Ms Chow mentioned these issues. It was submitted that she decided to rescind because she had been deceived by the Plants (as was demonstrated by the fact that she did not obtain any valuation advice before deciding to rescind) and thus that the decision to rescind was not an indicator of the position she would have adopted had the information contained in the Plansearch report and the other matters I have referred to been set out in the ROT. In fact, Ms Smith submitted that the decision to rescind was taken, "... against legal advice, relying, if anything, on Mrs Kwok's own uninformed comments prompted by her own equally uninformed friends ... it was an entirely emotional response to the situation ... and in no way reflective of what would have happened in November 2010".
"I am sure I would not have entered into the purchase agreement if I had known that there was going to be a school for 1250 pupils and 250 staffs in the same block as my property."
While it is true that the failure of the defendants to inform Ms Chow of the Plansearch report or its contents had by then become apparent and other legal advice was being taken, I have no reason to think that this was not reflective of her honest belief at that time, expressed months before these proceedings were commenced.
.
Mitigation.
"... does not impose on the plaintiff an obligation to take any step which a reasonable and prudent man would not ordinarily take in the course of his business..."
It is difficult to see how proceeding with a transaction that a claimant judges to be or to have become inopportune cannot come within the scope of this qualification. Lord Haldane continued in relation to the scope of the duty to mitigate in these terms:
"When in the course of his business he has taken action arising out of the transaction, which action has diminished his loss, the effect in actual diminution of the loss he has suffered may be taken into account even though there was no duty on him to act."
Whether the claimant has acted reasonably is not to be judged too harshly against the claimant when the breach has placed the claimant in a difficult position - see Banco de Portugal v Waterlow & Sons Limited [1932] AC 452 ("Banco de Portugal") per Lord Macmillan at 506 where he said this:
"Where the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment, the measures which he may be driven to adopt in order to extract himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticise the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency. The law is satisfied if the party placed in a difficult position by reason of the breach of the duty owed to him has acted reasonably in the adoption of remedial measures and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken."
"In your letter of 5 February 2013, you request confirmation as to our client's position in respect of a mediation after the exchange of witness statements. We explained in our letter of 1 February 2013 that our client's concerns were that it was not obvious what benefits a mediation will have in this instance. We have discussed a possible mediation with our client again and this view is unchanged following the exchange of witness evidence. There are no issues as to quantum and the key question being whether the contract could have been rescinded is a matter of legal interpretation. Our client's position is that it was entitled to rescind the contract. We are in agreement and this is supported by both leading and junior counsel. Our client's belief that its case is watertight in this regard is an entirely reasonably held belief in the circumstances, particularly in light of your client's evidence. We cannot therefore see there is any reasonable prospect of a mediation being successful, and if you disagree please explain why and our client will give the issue further consideration. If your clients are prepared to agree that the deposit monies be returned to our client and to then mediate in respect of our client's counterclaim including interest, then this may be more attractive to our client. Otherwise our client has reached the stage where the case has progressed significantly and costs have been incurred as a result and when faced with a mediation that has in our client's view no real prospect of a successful outcome, the situation remains unchanged."
" For the record our clients remain willing to mediate and you will no doubt have explained to your client the implications in terms of costs of the position it has adopted. We do agree, however, that as you say a key issue, but not the only key issue, is a matter of legal interpretation, namely the scope of question 3.1 of the sellers' property information form, and the extent to which the matters pleaded in paragraph 7 to 24(a) of your client's amended defence require a different answer to that by our client. We set out our client's position below ..."
Clydes did not then or at any time thereafter make a CPR Part 36 offer ("part 36 offer"). Wedlake Bell responded to this by a letter dated 18 June 2013 in these terms:
"Your letter refers to mediation and we have considered that possibility. Our client fully expects to recover the deposit damages and costs. It is for that reason that we consider a mediation between our respective clients is unlikely to succeed. However, it occurs to us that as our client has issued proceedings against Bird & Bird and it is clear from Mr Plant's witness statement that he is blaming Magrath, this is really a dispute about which of those two firms' indemnity insurers should be picking up the bill and any mediation which does not include them is therefore a waste of time and money. We would be prepared to attend a mediation which includes our respective clients and their respective conveyancing solicitors and their insurers. If your clients agree with our proposal, then please contact the relevant solicitors and their insurers and put the suggestion to them. Please then inform us of their response."
"Finally in this section, we note your proposal of a mediation involving our respective clients Bird & Bird and Magrath. Our clients would have no objection to Bird & Bird attending a mediation if your client so wishes, but it is certainly not for our clients to put that suggestion to Bird & Bird since they have no relationship or claim against them. As for Magrath, we cannot see any way in which they and their insurers could be ready for a mediation before the trial date in this matter, but in any event our clients propose to deal with matters between them and Magrath following the outcome of this litigation, since that outcome will be pivotal in any claim against Magrath. If therefore you wish a mediation between our clients, your client and Bird & Bird, please let us have some suggested dates and mediators."
It is to be remembered that the trial was due to take place on 8 July 2013. OHL's solicitors responded to this by a letter of 25 June 2013 in these terms:
"We note your clients' refusal to participate in a mediation attended by both sides and their respective insurers which is the only basis on which our client would be prepared to attend. On 17 May 2013 we asked your predecessor to confirm whether any claim had been issued or intimated by your client against Magrath LLP. We have received no reply to that question. Please confirm by return and provide us with all associated documentation. Any such material is clearly disclosable."
"It is not open to your client to insist that Magrath attend a mediation. Your client has no claim against our clients' solicitors and it is perfectly reasonable for our clients to deal with their claim against Magrath separately. In any event, as we explain, there is no realistic way in which Magrath could be ready for mediation before the trial of our client's claim. As we also said in our letter dated 21 June, our clients would have no objection to Bird & Bird attending a mediation if your client wishes to arrange that. We have been in contact with Bird & Bird solicitors and it may be that we can support your client's attempts to involve them in a mediation. Please let us know if you would like us to do that."
This correspondence comes to an end with OHL's solicitors' response at 3 July 2013 which was in these terms:
"You have rejected our proposed format for a mediation. We do not see why Magraths' insurers could not be ready for a mediation. Our view is that it is up to you to make a meaningful offer of settlement if you want to avoid a trial."
Contributory Negligence
"We are unable to advise on the value of the property. We would advise you to arrange for a valuation of the property to be carried out if this has not already been arranged. You should ensure that the valuer is aware of the matters mentioned in this report, as these may have an impact on the valuation."
The last sentence suggests that the valuation would be of the property as described in the report on title.
Conclusion