Bacciottini v Gotelee and Goldsmith
The Court of Appeal has recently assessed the applicable measure of damages where the Claimants had taken steps to mitigate their loss.
In January 2007 the Claimants made an offer of £575,000 to purchase a site in East Suffolk which had residential development but no actual planning permission. The land was part of the curtilage of Snape Hall and comprised of a two-bedroom cottage converted in or after 1974, two barns and some five acres of land.
- The Claimants were advised by the Defendant that there were no conditions adverse to the development project in the 1974 planning permission relating to the cottage and contracts were exchanged with completion taking place on 30 May 2007.
In September 2008 the Claimants found out that the 1974 planning permissions restricted the use of the cottage to ancillary accommodation solely in conjunction with the occupation of Snape Hall as a single private dwelling. The Claimants applied for lifting of the condition on the 1974 permission which was achieved in September 2009 and during 2010 and 2011 permission was given to develop the rest of the site and to develop and double in size the cottage.
The Claimants sued the Defendants for negligence in failing to draw their attention to the restriction on the 1974 planning permission and claimed in damages:
- The diminution in value of the site of around £100,000 caused by the undisclosed 1974 condition as at 30 May 2007, the date of completion;
- 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.
The general principle in cases like this is that ordinarily the measure of damages is the sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in had he not sustained the wrong for which he is now getting his compensation or reparation. (Livingstone –v- Rawyards Coal Co. (1880) 5 App. Cas. 25).
Further, damages must be assessed at the date when the damage occurred, which is usually the same day as the cause of action arises. (Philips –v- Ward  1 W.L.R. 471).
The court in the first instance held that, given that the Claimants had no choice other than apply for the lifting of the 1974 condition, the removal of that condition was a matter of mitigation and went in reduction of any loss suffered by them. It followed that in the circumstances there was no justification for any award above a nominal £250, which was the cost of the application to the local authority to remove the planning restriction. The Claimants appealed.
The appeal was dismissed on the basis that the rule allowing a person misled into buying property to recover the difference in value a damages was a starting-point and no more. It should not apply where, as in this case, it did not represent a Claimant's true loss.
The Court of Appeal considered that damages are to be assessed in the real world and compensation is a reward for real, not hypothetical, loss. It is not to be made an occasion for recovery in respect of a loss which might have been, but has not been, suffered.
The court thus declined to apply the diminution in value rule, on the basis that no loss had been suffered following the Claimants' actions to remove the planning restriction. There should be no principle that subsequent events, including steps taken by a Claimant to mitigate loss, were irrelevant.
The general proposition is that the law does not permit a Claimant to recover more than is seen to be his actual loss and the rules of mitigation may deprive the Claimant of all or part of the damages for loss which otherwise he might have recovered.
By reason of the successful application to lift the restriction the Claimants got what they should have got. To award the Claimants damages by reference to the diminution of value at the time of purchase would involve double payment and overcompensate them for loss that, in any event, they had not suffered.
The decision is a reminder that the general rule that damages are assessed at the date when the damage occurred is a starting point only.
Generally, if the Defendant's breach causes the Claimant to take reasonable steps to reduce or avoid its loss and the Claimant receives a benefit as a result, such benefit will be brought into account in assessing damages. If this were not the case, the Claimant would be overcompensated for its loss.