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The recent case of Hermann v Withers LLP [2012] EWHC 1492 (Ch) provides a cautionary tale to property lawyers giving useful guidance on the steps a party should take to mitigate their losses and whether costs of mitigation are recoverable.
The facts
In this case, Mr and Mrs Hermann (“the Hermanns”) purchased a property in London valued at Ł6.8 million. In the course of pre-exchange enquiries, it became apparent that it was ambiguous whether ownership of the property also included a statutory right to use a communal garden that was situated opposite the property. Whilst the original estate agent’s advertisement for the property stated that it “has access to a communal garden” this right was not provided for in the draft conveyance or title documents.
The Hermanns’ lawyers researched the issue and concluded that the owners of the property were entitled to access under the Kensington Improvement Act 1851. Following the purchase of the property, the Hermanns were advised by the committee who ran the communal garden (the “Committee”) that they were not entitled to access.
The Hermanns therefore instructed solicitors in October 2008 and a series of correspondence followed between the Hermanns and the Committee in relation to the access rights. On 13 May 2009, the Committee offered to grant the Hermanns a 50 year licence for garden access for a price of Ł25,000. The Hermanns rejected this offer and commenced legal action in an attempt to mitigate their losses. The matter went to court in 2010 and the court found against the Hermanns. After an expensive court battle, the Hermanns still had no access rights, and commenced a professional negligence claim against their conveyancing solicitors.
The court’s decision
The court held that their conveyancing solicitors had been negligent. The Judge emphasised that the conveyancing solicitors should not have given definitive advice to the Hermanns when there was considerable doubt as to whether this advice was correct. The interesting aspect of the Judgment relates to the court’s ruling in relation to mitigation of loss. The conveyancing solicitors successfully argued that the Hermanns had failed to mitigate their losses by not accepting the Committee’s offer of a licence.
As a result, the Hermanns were only entitled to recover their legal costs up to the end of May 2009, i.e. shortly after the offer of 13 May 2009 was made and not after that.
Impact of the case
Whilst claimants have an obligation to mitigate their losses and will be entitled to recover the reasonable costs of pursuing this process, these costs will not include taking unnecessary/risky litigation when a reasonable offer has been made.
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