The Court of Appeal, in Orientfield Holdings Ltd v Bird & Bird LLP  EWCA Civ 348, held that City of London law firm Bird & Bird were liable for a duty breach of failing to disclose a neighbouring High School planning application in their report on title to a former client. Rebecca Chow instructed the 2birds outfit via an SPV (Orientfield) in her £25.75 million acquisition of a seven-bed mansion at 56 Avenue Road, St. John’s Wood, London NW8 6HT.
She exchanged based on a report on title which said “The information provided by the sellers in their replies to our pre-contact inquiries did not reveal anything that adversely affects the property.” The client relying on this negligent advice, paid over a £2.75 million deposit to the seller. Once she learned of the High School planning application at number 80 Avenue Road she withdrew from the sale and settled with the seller to recover half of the deposit sum.
The client then successfully claimed against her former law firm for the balance of the deposit and costs of and occasioned by their negligence, amounting to approximately two million pounds.
Duty of care in conveyancing
In any conveyancing matter it is clear that the solicitor must provide a thorough report to the client on the title they are considering purchasing.
Typically a purchaser’s conveyancer has to: (1) check identification; (2) request and check searches; (3) receive and check property information forms and fixtures and fitting forms; (4) raise additional queries; (5) review and explain mortgage terms and conditions; (6) review and explain the sale contract and property title; (7) report on the purchase to the buyer in a written document known as a ‘report on title’; (8) agree and secure the deposit; (9) secure insurance details; (10) effect exchange of contracts; (11) organise drawdown of funds; (12) effect completion of the sale. The buyer’s solicitor will then register ownership at HMLR and pay any stamp duty land tax due (SDLT).
All of the work of the conveyancer whether they are a solicitor or licensed conveyancer must be done to a reasonably competent standard.
Breach of the duty of care
The High Court and the Court of Appeal held that Bird & Bird had a duty of care to advise their client on the contents of a Plansearch report that they had obtained which highlighted the presence of a neighbouring planning application to build a High School near the property:
“It was a breach of duty to say, as was said, that the information provided did not reveal anything that adversely affects the property.” “It is for the client to judge the impact … not the solicitor.”His Honour Judge Mark Pelling QC
It was successfully argued that the conveyancers should have stressed the negative impact to the client before she exchanged; not doing so and not even providing the report which detailed the adverse neighbouring planning application was a breach of duty owed to the client.
Court of Appeal Conclusion
Lady Justice Gloster found no basis for the appeal court “to upset the [High Court] judge’s conclusion “that a summary of the Plansearch report would have revealed the development to the client. “The judge heard all the evidence and reached the wholly unsurprising conclusion that a non-negligent summary would have resulted in the detail of the development emerging.”
Finally, LJ Gloster found that “Orientfield Holdings 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.“
What should 2Birds have done?
The best thing the conveyancer could have done was to provide the Plansearch report in full to the client and ideally also summarise and thereby highlight any local planning applications (as set out in the report itself) and to reference these in the conveyancer’s own report on title.
We note the wise comments of an experienced conveyancing professional who practised for 30 years, as follows:
“Over 25 years ago I added a paragraph to my local search report which warned that searches did not include information about possible development in the vicinity of the property. Later on I included an additional warning in my engagement letter, to give the client more time to go to the local authority to inspect planning records.”
“When Plansearch reports became available I gave the client the option to have such a search. When they did, I sent a copy of the report to the client and told them I was not in a position to assess whether or not the report might affect the purchase as many planning issues were subjective. I made it very clear it was down to the client to read the report and that they could not rely on my having read it.”David Briffa
Professional Indemnity Viewpoint
From a professional indemnity perspective, a legal causation argument was developed that the negligence did not cause the loss as the purchase was a speculative investment that would have proceeded. However, the Court found that Orientfield would not have proceeded to exchange if they knew about the adverse planning. The lawyers representing Bird & Bird argued that the breach did not cause any loss as the purchase was speculative in that the property was not visited by the purchaser and there was no survey or valuation.
In any event, the Court of Appeal determined that the client would not have proceeded to exchange had she known of the adverse planning applications. No doubt this was because of the close proximity of the site and the significant impact a large secondary school would have had.
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