Conveyancing liability: Solicitor ordered to pay £1.8 million in damages for failing to report on a planning search.
This case highlights the extent to which a solicitor is obliged to report on title during a property transaction.
If a solicitor orders a search or planning report, even if not instructed to do so, he or she creates a duty upon themselves to consider its contents and report back to the client. Not reporting to the client in such circumstances could amount to professional negligence.
Orientfield Holdings Limited instructed law firm, Bird & Bird on its purchase of a large residential investment property in St John's Wood for £25 million.
Property information form
In the property information form completed by the seller’s solicitors, the sellers were asked if they had any personal knowledge of any proposals to develop or make alterations to property or land nearby. The seller answered, “Please make your own inquiries.” In a brief exchange of e-mails, the seller’s solicitor advised the buyer’s solicitor to carry out a plan search which would reveal all the planning applications in the area.
The buyer’s solicitor could have insisted on the sellers providing an answer to the particular question, but instead went ahead and ordered a plan search as suggested by the seller’s solicitor. This was not a usual search and the buyer’s solicitor only ordered it in light of the seller’s solicitor’s letter. That search resulted in a report (plan search report) which was received and read by the buyer’s solicitor before the report on title was prepared and sent to the buyer.
The plan search revealed plans for two small existing schools near the property to be developed to create two new large schools – an academy and a specialist school - accommodating 1,250 students and 250 staff. Both sites were within 300 metres of the property. A search of the local planning authority records would have revealed and ultimately did reveal the full nature of what was proposed.
Report on title
The report on title made no mention of the plan search report. In it, there was a summary of the outcome of all the other various searches carried out, including local land charges and local authority searches, drainage and water inquiries, environmental searches, a chancel repair search and a Land Registry search, but the plan search report was not referenced at all.
The buyer’s solicitor did not disclose the existence of the plan search report, nor did he summarise its contents either in the report on title or otherwise prior to exchange.
The buyer paid the deposit of £2.575m and the contracts were exchanged.
Between exchange and completion, the buyer learnt of the proposals to re-develop the school sites. This was raised with the buyer’s solicitor and at that point the buyer’s solicitor provided a copy of the planning report to the buyer.
Rescission, deposit and pursuant litigation
The buyer sought to rescind the contract on the basis that the seller had not disclosed the school development. A claim was litigated between the buyers and sellers over the deposit amount. This claim was settled prior to trial when it was agreed that the parties would split the deposit between them.
When the buyer was unable to recover the full amount of its deposit from the seller, it brought a claim against its solicitors, Bird & Bird. The buyer argued that had they been aware of the development, they would not have proceeded to exchange because it affected the value of their investment. As well as the remainder of the deposit, the buyer sought to recover its legal costs from Bird & Bird for the prior litigation and of the aborted transaction itself.
The claim was denied by Bird & Bird who claimed that no duty extended to informing the buyer of the development. They further argued that, in any event, the losses of the buyer were not caused by the alleged breach.
But the Court found that the solicitors had in fact breached the duties they owed to their client, the buyer. It was held that once the solicitors had made the decision to undertake the extra planning search, they were then under a duty to explain the results of this fully to their client.
The Court of Appeal rejected an appeal by the solicitors, and upheld the first instance decision.
Points to consider
Did your solicitor pass on to you all information they learnt about the property you were purchasing? If your solicitor made a decision on your behalf based on information you didn’t see, and without your consent, it may be the case that your solicitor acted negligently on the transaction.