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Lessons in mitigation

Eamon Mooney considers the merry dance played by solicitors during allegations of professional negligence

16 December 2014

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When a solicitor faces a negligence claim, a ritual dance commences. There is often an early skirmish over the duties the solicitor owed, followed by more elaborate footwork surrounding causation and the consequences of any breach of duty. Then, however, it is frequently game over.

The client relied on the solicitor; the client was let down; and the client has taken a course of action they wouldn't have taken otherwise. Noises will be made by the defendant about their former client failing to take reasonable mitigation steps, and there will be assertions from the claimant that the client should not have to act speculatively to try to sort out the problem caused by the solicitor.

Figures will be haggled, payment will be made and the matter will be settled -with the music fading and drawing the predictable dance to a close.

But those time honoured steps in that traditional dance were not followed in the Chancery decision in Bacciottini & Cook v Gotelee and Goldsmith, handed down in October. Mitigation became the focus of the dance, and losses claimed might not be losses suffered. So found the court.

The facts were not strange. The claimants instructed the defendant solicitors in a property transaction in 2007, a granary. Mr Bacciottini was a developer of some experience. The granary in question was in the village of Saxmundham in Suffolk, an ancient place first mentioned in the Domesday Book and the setting for a number of historical 'whodunit' novels.

The property was a mix of various elements with some planning complications, having the benefit of a 1974 planning permission. The granary was bought for the £550,000 asking price. His Honour Judge Simon Barker QC accepted that the real value was actually £450,000, and there were other development opportunities the claimant might have pursued if this possibility had fallen through.

As would be expected, the solicitors carried out local searches. Those were delayed and, with the sellers pressing to complete, the claimants, who were about to travel abroad, signed the contract and left it with the solicitors with strict instructions that completion should not take place until the solicitors had reported the search results and the claimants had authorised exchange.

The solicitor called the claimants in Italy and told them that the searches were clear. When basked by Bacciottini about the 1974 planning consent, the solicitor told him he had it in front of him, that it was all fine (it wasn't) and that there were no adverse conditions (there were). Exchange subsequently took place.

Only after completion, after engaging an architect and progressing their development plans, did the claimants find that there was a planning restriction the solicitors had not identified and which stopped the development plans in their tracks. They had not been advised properly. And so the negligence dance commenced.

Perhaps unsurprisingly, the solicitors admitted negligence. The claimants' position was that they did not know about the planning problem, they overpaid by £100,000 and, had the solicitors properly advised them, would either have paid £100,000 less or they would have walked away. They simply paid too much for an asset with problems that they were not warned about.

Traditionally, this would lead to £100,000 being awarded. Not so, said the judge. In fact, the claimants had managed to remove the planning problem at a modest cost of a few hundred pounds. They mitigated amazingly well. Mitigation was not a final flourish in this dance but the central feature.

Of course, the judge was correct. Damages are intended to compensate for loss and not provide a windfall. The decision is a tidy reminder that, even if a claimant takes steps that are not intended to mitigate (here it was to progress the development rather than reduce the loss), the court will take account of any steps that diminish the loss.

One has to wonder whether a result might be that claimants and their advisers will think twice before taking steps that might easily remedy a problem. Is justice served by that? Time will tell.

Eamon Mooney is a partner at Kennedys

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Professional negligence