Bacciottini & Anor v Goldsmith

In this case, Gotelee and Goldsmith, a firm of solicitors now trading as Gotelee, (“Gotelee”) admit that their conduct in the course of acting for Mr Michele Bacciottini and Ms Rosemary Cook, in a property transaction in 2007, was negligent. However, they dispute that their negligence has, in the events which have happened, caused any loss beyond the nominal sum of £250.

Alternatively, if that is wrong, they dispute the quantum of Mr Bacciottini and Ms Cook's claim. Although the partner concerned at Gotelee, Mr Jonathan Mathers, made and filed a witness statement, when the time came for the defendant's factual evidence to be presented, he was not called. Accordingly, the factual evidence is that of Mr Bacciottini and Ms Cook, save insofar as undermined by cross-examination or contradicted by reliable documentary evidence.

As between Mr Bacciottini and Ms Cook, Mr Bacciottini had taken the lead in instructing Gotelee and in progressing the property transaction. Accordingly, Ms Cook had nothing of substance to add to Mr Bacciottini's evidence. She did, however, corroborate much of what he said.

Mr Bacciottini is now aged 70 years. He was born in Florence but has been based in England for many years. His command of English is fluent, and his mind is very sharp. To give one example, when challenged in cross-examination about an answer to a question, Mr Bacciottini correctly restated the question he was asked from which it was clear that his answer was in fact on point.

My impression of Mr Bacciottini is that his self-description, that he is a careful and prudent property developer interested in taking and considering advice but trusting in his own judgement when at odds with advice obtained, is accurate. In his written evidence, he makes clear that he evaluates and takes advantage of opportunities.

As a witness I am unable to accept his evidence without qualification, but I do accept his evidence as generally reliable. To the extent that his evidence is inconsistent with contemporaneous documents to which I was referred during the trial, I reject that evidence. So, too, to the extent that it was undermined in cross-examination. This is not a strong or direct criticism of Mr Bacciottini, and I bear in mind that the relevant events happened some years ago.

Unusually for an expert witness, Gotelee's expert planning witness sought to cast a shadow over Mr Bacciottini's character and his conduct as a property developer by reference to a development within the area controlled by Tendring District Council in Essex. None of this was put to Mr Bacciottini in cross-examination, and indeed, Gotelee's own representatives, Mr Gatt QC, who leads Mr Robertson, have not associated their client with those observations.

There may or may not be something in what Mr Le Grys, who was the defendant's planning expert, said, but, for the purposes of this judgment, I attach no weight to that evidence adverse to Mr Bacciottini. On the other hand, it does, as Mrs Peacocke, who appears for Mr Bacciottini and Ms Cook, submits, taint the objectively of Mr Le Grys' evidence as an expert witness, and I must therefore approach his evidence so cautioned.

Against that introduction to the case, I turn to my evaluation of the factual evidence and make my findings of fact, many of which are uncontroversial or common ground.

The property transaction in question is the purchase of The Granary, which is at Church Common, Snape, Saxmundham in Suffolk, IP17 1QL. Until about 2000, this property had formed part of Snape Hall. The Granary comprised a two-bedroom cottage converted from a granary in or after 1974, a timber-framed barn, a brick barn or outbuilding, which had been used as a jam factory in the last war, and some 5 acres of land, including common land. The vendors of The Granary in 2007, a Mr and Mrs Harrison, had previously owned and occupied Snape Hall, which they sold in 2000. The Granary was marketed on the basis that it presented a development opportunity; in other words, without the benefit of existing planning permission.

The respective expert valuation witnesses, Mr Clarke for the claimants and Mr Fletcher for the defendant, were agreed that at the material times in 2007, the property market was still very buoyant and rising. Mr Clarke was of the view that such development opportunities were not uncommon in the area at the relevant time. His evidence was that the estate agency in which he is a partner had considerable experience of selling such properties. Mr Fletcher's evidence was that such opportunities were rare, because vendors generally preferred to realise for themselves the gain that accrued to a grant of planning permission.

Mr Bacciottini and Ms Cook's interest was to find a property with development potential which would also serve as their home for a year or two while they progressed their development at least to the point of obtaining planning permission and then took stock in the light of whatever might be the prevailing market conditions. Mr Bacciottini is experienced in this field. For the past 30 plus years, his occupation has been small-scale residential development in East Anglia, especially in Suffolk.

Having regard to the expert evidence, I find that in 2007 there would have been some, but not many, alternative development opportunities, and having regard to Mr Bacciottini's evidence, I find that he would have turned to those opportunities in the course of 2007 had the proposed purchase of the Granary fallen through.

On 23rd January 2007, having made a subject-to-contract offer at the asking price for The Granary of £575,000, Mr Bacciottini then instructed Gotelee to act in the purchase.

By 2007, Mr Bacciottini was an established client of Gotelee. He had originally enjoyed an excellent working relationship with a Mr David Day, and when Mr Day left the partnership in 2006, Mr Bacciottini's instructions were received, on Mr Day's recommendation, by Mr Mathers.

On 25th January 2007, Gotelee sent Mr Bacciottini and Ms Cook their engagement letter, and Mr Bacciottini and Ms Cook also instructed Gotelee to prepare a trust deed to reflect their respective contributions to, and interests in, The Granary.

Mr Bacciottini and Ms Cook understood that Gotelee had immediately put in hand appropriate searches, including a local search. It appears from the documents in the trial bundle that this did not happen until 12th April 2014, and this oversight, the failure to apply for the searches, may have come to light and been put in hand because Mr Mathers was to and did meet Mr Bacciottini on the following day, 13th April 2014.

By the latter part of April 2014, the vendors of the Granary were seeking completion on or by 30th May 2007, but Mr Bacciottini and Ms Cook were not in a position to exchange contracts because Mr Mathers had told them that the local authority search was still outstanding, and further, that their mortgage offer was still awaited.

Because Mr Bacciottini and Ms Cook were to spend May at Mr Bacciottini's property in Italy, they signed the purchase contract at Gotelee's offices and gave instructions that the contracts were not to be exchanged until Mr Mathers had reported on the search results and they had confirmed their willingness to exchange.

On or about 10th May 2007, Mr Mathers called the claimants and he spoke to Mr Bacciottini in Ms Cook's hearing. He said that he had received the local searches, that they were clear, that the contracts could be exchanged -- the mortgage offer had by then been received -- and, when asked by Mr Bacciottini about the planning consent of 1974, the gist of Mr Mathers' reply was that he had it before him, it was all fine and there were no adverse conditions.

On that basis, Mr Bacciottini and Ms Cook instructed Mr Mathers to exchange contracts, which he did on 14th May. What Mr Mathers told Mr Bacciottini and Ms Cook was false. The 1974 planning consent was not at all fine; there was an adverse condition. The 1974 permission to convert The Granary, then described as "a barn", to a dwelling at Snape Hall, of which it formed part at that time, was subject to a condition that: "The converted barn shall be used only as ancillary accommodation solely in conjunction with the occupation of Snape Hall as a single private dwelling."

I pause here in the factual narrative to address a point of construction raised by Mrs Peacocke.

On behalf of the claimants, she submits that the 1974 restriction is not confined to The Granary as a two-bedroom cottage but extends to the whole site, in other words to the barn and to the Jam Factory as well.

In this context, Mrs Peacocke relies upon first, the terms of the 1974 restriction; secondly, Suffolk Costal District Council's local planning officer Mr Price's description of the property in 2009 when recommending to the planning council that the restriction be lifted; thirdly, the unchallenged evidence of Mr Bacciottini in cross-examination on Day 1 (the transcript reference is page 75, lines 15 – 21); and fourthly, a letter from the claimant's former solicitor, in succession to Gotelee, written following an informal response from Mr Price to a full planning application, that is for development of the Granary, the barn and the Jam Factory in January 2009.

Mrs Peacocke's reference to the terms of the restriction is more accurately to the reasons given for the planning restriction, specifically: "As the Council would not approve a separate unit of living accommodation on this site."

Development of the other buildings was not sought in 1974. The planning witnesses, Mr Hancock for the claimants and Mr Le Grys for the defendant, were both firmly of the view that the planning regime before 2000 was very much more restrictive.

I readily accept that had there been an application to develop the barn and the Jam Factory in 1974, at best the outcome would have been the imposition of a similar condition; but that is not the position in fact. As things stood in 2007, only The Granary as converted was subject to a restriction. The reason stood to be evaluated in the context of the prevailing planning law and policy, as did or would any application relating to the barn and/or the Jam Factory.

Mr Price's description of the property in January 2009 recites the restriction and the reason. However, he recommends lifting the restriction for reasons including: "... pragmatism and practicality having regard to all the circumstances ..."

Mr Bacciottini's unchallenged evidence in cross-examination was in fact entirely neutral on the question of whether or not the site was blighted by the restriction. Moreover, in his written evidence, all Mr Bacciottini says is that he was made aware that the application, as it stood, would not be recommended for approval; and, he immediately instructed its withdrawal because he did not wish to risk a refusal. Mr Bacciottini later discovered that the lifting of the restriction had been supported but extension of The Granary, to double its size and conversion of the barn, had been opposed.

As to the letter from Mr Bacciottini's former solicitor, it is far from clear that the reason for the restriction in 1974 had any bearing on Mr Price's informal notification about the development applied for. I am not in a position to draw any such inference.

I therefore reject the submission that the reason given for the 1974 restriction operated as a blight on the site as a whole. Lifting the restriction in respect of The Granary would not leave the remainder of the site blighted or restricted by the 1974 reason. Further, there was no evidence from the planning witnesses that Suffolk Costal District Council would do other than evaluate each application on its merits by reference to the prevailing planning laws and policies.

Returning now to the factual narrative, the transaction then completed on 30th May 2007, the vendor's preferred date, and Mr Bacciottini and Ms Cook moved into The Granary to live there together. To fund the purchase, Mr Bacciottini had arranged a mortgage in the sum of £495,000, and the property had been valued by the lender at some £600,000. There is an issue as to whether or not this valuation included the garage. On the evidence drawn to my attention, the position is unclear, and in any event, the point is not material to the outcome of this case.

Mr Bacciottini progressed his development plans with Mr Ben Powell, an architect whom he had instructed in April 2007. In September 2008, Mr Powell submitted plans for an informal written comment.

On 6th October 2008, Suffolk Costal District Council wrote to Mr Powell informing him of the restriction and made constructive comments on alterations to the proposed development of the barn to improve its prospects of planning approval. Evidently, this news was not conveyed to Mr Bacciottini and Ms Cook immediately. As an aside, I add here that this would not have been appropriate had the 1974 restriction, or the reason for it, operated as a blight on the whole site.

Coincidentally and fortuitously, Mr Bacciottini and Ms Cook moved their instructions from Gotelee, on about 13th October 2008, and collected the file relating to the property. Mr Bacciottini and Ms Cook, through Mr Powell, then submitted a full planning application in January 2009 which they withdrew in March. Here I note that Mr Powell's advice was that they should first apply to lift the 1974 restriction and then pursue other planning applications.

To address Mr Bacciottini and Ms Cook's predicament, Mr Price, when consulted by Mr Bacciottini, also recommended that Mr Bacciottini and Ms Cook first apply to have the 1974 condition attaching to The Granary removed and then apply for development of The Granary, the barn and/or the Jam Factory.

In September 2009, Mr Bacciottini and Ms Cook did apply for the 1974 condition to be lifted. Mr Price recommended this course to the planning committee, and in November 2009 the planning committee of the Suffolk Coastal District Council did lift the condition.

Over the course of 2010 and 2011, Mr Bacciottini and Ms Cook sought and obtained permission to develop the barn, to develop the Jam Factory and to develop and double in size the cottage, i.e. the Granary building itself.

In December 2011, Mr Bacciottini and Ms Cook served a claim letter, and in December 2012, Gotelee's negligence was conceded. Proceedings then followed, commencing in March 2013.

Mr Bacciottini and Ms Cook's claim is for the diminution in value caused by the undisclosed 1974 condition as at the date of completion -- that is 30th May 2007 -- together with special damages, specifically the incremental element of SDLT on the overpayment, mortgage interest which would have been saved had the price reflected the true condition of the property, and other related expenses.

In her skeleton argument, Mrs Peacocke for the claimants characterises the negligence as a failure on the part of Gotelee to provide information as distinct from a failure to advise on the course of action to take. That is the way in which the case was presented throughout the trial.

I make this observation, because some of the pleaded particulars in the particulars of claim allege duties to advise on a course of action to take.

In the light of the presentation of Mr Bacciottini and Ms Cook's case, I approach the complaint and issues on the basis that Gotelee failed to provide information which would have revealed the existence of the 1974 condition before exchange of contracts, and that in consequence, Mr Bacciottini and Ms Cook proceeded to exchange and complete the transaction at the wrong, ie too high a, price. The claim is that as at 30th May 2007, Mr Bacciottini and Ms Cook suffered a loss because they paid more than the true value of the property.

Both valuation witnesses are of the view that The Granary as a whole, that is with the barn and the Jam Factory and the land, as they were in 2007, but free from the 1974 restriction or condition, was worth less than £575,000. Mr Clarke's view at the time of his report in 2011 was that the property was worth some £500,000. However, during oral evidence, and having his attention drawn to the mortgage valuation, he extended his value to a range of not less than £500,000 but up to and probably closer to £550,000.

Mr Fletcher, the defendant's witness, maintained his view that the value at 30th May 2007, free from the 1974 condition, was £550,000.

As to the prospects of the 1974 condition being lifted, the evidence of both planning witnesses is, to an extent and for different reasons, tainted.

Mr Hancock, who is the claimant's witness, was making his debut as an expert witness to the court. His evidence was not CPR 35 compliant, notwithstanding that his instruction pack had included a copy of CPR 35. When taken through certain provisions of CPR 35 in cross-examination, it became apparent that he was unfamiliar with CPR 35, and further, that he had really not addressed his mind to the approach to be taken by a court expert.

In one respect, he did, however, have the advantage over Mr Le Grys, the defendant's expert planning witness: Mr Hancock actually had experience of dealing with Suffolk Costal District Council.

My assessment of Mr Hancock is that he was overcautious to the point of being unrealistically pessimistic. I attribute this approach to the unusual, perhaps to him unique, nature of the problem he was to address, and to his default position, namely that of being very cautious in outlook and approach.

Mr Le Grys on the other hand, and notwithstanding his obvious hostility to Mr Bacciottini, did engage with the problem by considering the post-2000 planning regime and examining what grounds there might be for refusing or accepting an application to lift the 1974 condition.

My view of the planning opinion evidence is that Mr Le Grys' opinion contains the more realistic appraisal of the prospects of the 1974 condition being lifted. In short, my view is that the prospects of the 1974 condition being lifted, in and after 2007, were, having regard to both the planning regime and the circumstances of the occupation of the property, very high.

As to the value in 2007, subject to the 1974 planning condition, the value of The Granary was stated by Mr Clarke to be £125,000. However, as Mr Gatt Queen's Counsel demonstrated in cross-examination, this valuation makes no sense when subjected to an arithmetical check test.

Mr Clarke, like Mr Hancock, is a newcomer to the role of court expert witness. I consider that he gave his evidence openly during cross-examination. However, at the time when his report was written, the litigation had not commenced and he had not intended his report to be CPR 35 compliant.

A later -- some two and a half years later -- statement purporting to bring his report within the CPR 35 criteria did not have that effect; again, as was demonstrated in cross-examination.

I accept that Mr Clarke has considerable local knowledge as an estate agent and a valuer, but his approach to the question of the value of the property at May 2007, taking the 1974 condition into account, is, in his own words, "subjective and speculative"; it lacks the objectivity and reasoning expected of an expert to the court.

In my view, Mr Fletcher's approach to valuation meets that requirement, and I do not accept Mrs Peacocke's submissions to the contrary.

So, as to the valuation as at 30th May 2007, subject to the 1974 condition, Mr Fletcher opines that the diminution in value would have been some £100,000 to £110,000 if there was a very high probability that an application to lift the condition would be successful; and further, that an additional diminution in value of £50,000 to £60,000 should be taken into account if the prospects were no better than 50/50, which was Mr Hancock's view.

On the evidence before me, I accept Mr Fletcher's opinion as to the diminution in value on the basis of a very high likelihood that an application to lift the 1974 condition would be successful. Accordingly, the actual value of the property at the material times in 2007 was some £450,000, and the overpayment some £100,000.

Mrs Peacocke submits that had Mr Bacciottini and Ms Cook been properly informed, they would either have purchased the property at a price reflecting its actual value or withdrawn from the transaction and thus spent no money.

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

Here I bear in mind that first, the vendors were not under pressure by reason of their purchase in Scotland because the transactions were not financially linked; secondly, Ms Cook placed considerable trust in Mr Bacciottini's skills, and he in turn was conscious of the need to protect her investment and act prudently; thirdly, the market at the time was buoyant and rising; fourthly, drawing on the combined evidence of Mr Clarke and Mr Fletcher, although there would have been other development opportunities, in the main, vendors preferred to sell with planning permission and realise a gain for themselves, so there was a real limit to alternative available development opportunities; and fifthly, applying to lift the restriction was a simple, obvious and cheap step to take.

Mr Fletcher, in an addendum to his report and in his oral evidence, addressed a number of ways in which a negotiation between Mr Bacciottini and Ms Cook, properly informed, and the vendors might proceed.

The important point is that had Mr Bacciottini and Ms Cook been properly informed, it does not follow that they would have been able to purchase the property at its fully reduced value, that is at £450,000. Of course, they could have withdrawn from the negotiation, but I doubt they would have done that without further negotiation.

It is far from clear to me that such a negotiation would probably have resulted in the sale of the property at anything approaching £450,000. Indeed, my view is that it would not. I say this principally because (1) applying to lift the restriction was such a simple, obvious and cheap step to take; (2) the vendors were not tied to this sale in order to achieve their purchase of a property in Scotland; and (3) the market remained buoyant with, at the time, prices continuing to rise.

Turning to the application of the law to the facts, Mrs Peacocke and Mr Gatt leading Mr Robertson have made detailed oral and written submissions on the trial as a whole and on the law, which I have considered, and for which I am extremely grateful.

Mrs Peacocke reminds me that I should start by asking myself, and should always keep in mind, the questions and answers: (1) what was the nature and scope of Gotelee's duty? (2) What was the purpose of that duty?

Mrs Peacocke submits that the duty was to provide information, and the purpose of the duty was to enable Mr Bacciottini and Ms Cook to decide whether to purchase the property, and if so, at what price? Mrs Peacocke submits that accordingly, Gotelee assumed responsibility for loss and damage suffered by Mr Bacciottini and Ms Cook to be quantified by reference to their purchase at the wrong price.

She further submits that removal of the 1974 condition is no mitigation of that loss, because it does not affect a refund of the overpayment.

Certainly, Gotelee's negligence deprived Mr Bacciottini and Ms Cook of the opportunity to make a properly informed decision whether to buy the property, and if so, at what price. But it does not follow that the position in which Mr Bacciottini and Ms Cook found themselves, namely having made an overpayment in the order of £100,000, is the measure, or a direct reflection of, the loss they suffered. The purpose of Gotelee's duty was not to save Mr Bacciottini and Ms Cook from overpayment, but to put them in the position of being able to negotiate having knowledge of all material facts. What Gotelee's negligence deprived Mr Bacciottini and Ms Cook of was the opportunity to negotiate with knowledge. As Mr Fletcher opined, a negotiation would not be likely to result in a sale and purchase at £450,000.

As both parties remind me by reference to Lord Blackburn's judgment in Livingstone v Rawyards Coal Company (1880) 5 Appeal Cases, 25, at page 39, damages are compensatory. That is, they should put the injured party in the same position as he would have been in if he had not sustained the wrong for which he is to be compensated or receive reparation.

If Mr Bacciottini and Ms Cook had not sustained the wrong, it is unlikely, in my judgment, that the transaction would have proceeded at a price some £100,000 lower than the actual price, for reasons already stated. Thus, an award of damages in or above that sum would overcompensate Mr Bacciottini and Ms Cook.

The case advanced by Gotelee is that Mr Bacciottini and Ms Cook in fact suffered no loss beyond some £250, because the lifting of the 1974 condition, at Mr Bacciottini's instigation, was a consequence of his and Ms Cook's duty to mitigate their loss.

Mrs Peacocke submits that that is a mischaracterisation of what Mr Bacciottini and Ms Cook actually did. What they actually did was progress their development proposals. Thus, the application to lift the 1974 condition was triggered, but not caused by, Gotelee's breach of duty.

There is long-standing often cited authority for the proposition that there must be a causal connection between the event said to constitute mitigation and the breach. Both Mrs Peacocke and Mr Gatt referred to British Westinghouse v Underground Electric Railways of London [1912] AC 673, and to more recent authorities, including the decision of Mr Justice Goff, as he then was, in the Elena D'Amico (1980),1 LL Rep 75, and most recently to the decision of Mr Justice Popplewell in The New Flamenco [2014] EWHC 1547.

In both the Elena D'Amico and The New Flamenco, the first instance judges distinguish between action or inaction caused by the wrongdoing and action or inaction triggered by the breach but resulting from an independent decision. The former is mitigation, the latter is not.

Moreover, the fact that the particular action or inaction may be reasonable and sensible in the circumstances is not sufficient for characterisation as mitigation. Again, see the judgments in The Elena D'Amico and The New Flamenco.

Also in the New Flamenco, Mr Justice Popplewell observed that: "Where the benefit arises from a transaction that the innocent party would have been able to undertake for his own account irrespective of the breach, that is suggestive that the breach is not sufficiently causative of the benefit."

In contract in tort cases, the injured party is, if the circumstances allow, under a duty to mitigate his loss. This duty is not onerous, but it cannot be disregarded.

It may be that a step may be taken or avoided for a combination of reasons, but whether the action or inaction is mitigation is measured by the presence or absence of a direct causal link to the wrong or breach. Where that is present, the fact that there is also some other or additional reason for the action or inaction would not of itself negate the causal link; but, very close scrutiny of the facts may be required to distinguish between the circumstance of a causal link and that of an independent, albeit related, action.

Referring to Mr Justice Popplewell's judgment in The New Flamenco, Mr Gatt draws attention to the judge's reasons for rejecting a causal link. These were or included that the difference in value was caused by fluctuation in the market not breach of the charter; that the decision to sell was a commercial judgement involving a commercial risk taken by the owners of the vessel for their own account; and that, on the facts, the breach provided the context or occasion, in other words the trigger, for the sale but did not cause the sale.

As these and the appellate authorities cited to me make clear, there is no ready set of principles which can be applied to any and every factual situation where mitigation is in issue. The issue of causation in the context of mitigation is fact and context sensitive.

The position of Mr Bacciottini and Ms Cook, once the condition had come to their attention, was that they were unlawfully occupying a property which they wished to continue occupying for at least a year or so. They were professionally advised to take the simple step of applying to have the condition lifted as a separate action. It so happens that that advice was given in the context of advice or preparation of plans for submission of an application to develop the property as a whole.

However, the evidence is not that the advice would have been different had the question of what, if anything, should be done about the 1974 condition been raised in isolation. Moreover, the 1974 condition was an impediment to realising the property at its full value as a residence, whether developed or not. Indeed, even continued occupation was potentially at risk of challenge.

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

My conclusion on the facts of this case is that Mr Bacciottini and Ms Cook's application to have the 1974 condition lifted was made pursuant to their duty to mitigate their losses.

The decision to make the application was not independent of Gotelee's negligence and did not arise independently as part and parcel of Mr Bacciottini and Ms Cook's series of planning applications.

There very probably was, as a collateral reason, the overall development project, but that was not causative of the application to have the 1974 condition lifted.

It follows from this that the loss claimed, the overpayment, if, contrary to my judgment, that is the correct measure of loss, was eradicated by mitigation. It also follows that the special damages claim fails.

There is no evidence before me sufficient to justify an award of damages other than or in excess of £250.