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Conveyancer liable for losses to buyer who pulled out of purchase

Bird & Bird solicitor failed to carry out investigations that would have revealed planned development

10 May 2017

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The Court of Appeal has upheld a High Court ruling that found Bird & Bird liable to a client who pulled out of a property transaction after discovering the existence of a nearby development just days before it was due to complete.

Lady Justice Gloster held that His Honour Judge Pelling QC had been correct in finding that the firm should have carried out further investigations when it received a search report, as this would have revealed the full details of a ‘major development’ likely to affect the property.

Orientfield Holdings, a British Virgin Islands-based special purpose vehicle, had agreed to buy a property in St John’s Wood, London, for £25.75m. Shortly before completion, the company pulled out of the sale when it found out that the local school a few doors up was going to be redeveloped as a six-storey academy. It lost its £2.57m deposit in the process.

Orientfield started litigation to recover its deposit. It settled with the sellers for half of the value plus interest, and brought a negligence claim against Bird & Bird.

As negotiations for the purchase were ongoing, Bird & Bird had sought additional information about planned developments in the area. A Plansearch Plus report was commissioned which detailed some developments in the vicinity but only summary information about the school’s development.

The firm wrote to its client at the time, saying that ‘the information provided by the sellers in their replies to our pre-contract enquiries did not reveal anything that adversely affects the property’.

In its 2015 ruling, the High Court said Jonathan Baker, a partner at Bird & Bird, ‘skim read the report in not much more than a couple of minutes, as he accepted in the evidence recorded’ and ‘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 [the sellers] thought the school would be sufficiently intrusive to appoint agents to object to the grant of outline permission in 2008 and to do so again as part of a group of residents when detailed planning permission was considered in 2010,’ the judge said.

A non-negligent solicitor, Judge Pelling QC concluded, would have included ‘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’.

‘If the appellant had not acted negligently, the respondent would not have exchanged contracts’ and ‘would have avoided the losses in respect of which the claim had been brought,’ the judge said.

On appeal, which was concerned solely with the causation point, Gloster LJ said in Orientfield Holdings v Bird & Bird [2017] EWCA 348 that ‘the fact that the judge did not himself formulate precisely the terms in which a non-negligent solicitor should have formulated the summary to my mind goes nowhere.’

‘He clearly and sufficiently considered what an appropriate summary of the Plansearch report would have revealed and his conclusion cannot be faulted,’ she said. ‘There is, in my judgment, no basis whatsoever for this court to upset the judge’s conclusion that a summary of the Plansearch report would have revealed the development to the respondent.’

‘The respondent would have known about the development before exchange, and the conclusion that the respondent would have withdrawn from the purchase at that time is unassailable,’ she said.

Jean-Yves Gilg is editor-in-chief of Solicitors Journal

jean-yves.gilg@solicitorsjournal.co.uk | @jeanyvesgilg

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