Judicial Review- recent case
20th November 2009
by Paul Denholm
Title Insurance does not require proof of negligence in order to compensate for losses.
The recent case of Stoll, Darren Atkins, Brambleridge Management Limited v Wacks Caller (a firm) [2009] EWHC 2299 (Ch) illustrates that negligent advice from a solicitor in a property transaction completed during the judicial review 'call-in' period is not in itself sufficient for the client to be compensated for loss in value of the property asset, as a result of a successful judicial review challenge and quashing of the planning permission benefiting the property.
First Title's insurance products do not require proof of negligent advice and are provided on a 'no fault' basis. Had the purchasers taken a Judicial Review insurance policy from First Title, the loss in market value to their property as a result of the quashing of the planning permission would have been covered by the First Title policy.
Background - 2003
Stoll and Atkins (the purchasers) had agreed in 2003 to buy a house in Manchester for £400,000. The purchase was conditional on the purchasers obtaining planning permission to convert the house into two flats and to erect a second house on the property.
On grant of the planning permission, the purchase was completed in accordance with the contract. In an unforeseen development, the neighbours responded to the grant of the planning permission by applying for judicial review.
This resulted in the court quashing the planning permission, loss of the ability to proceed with the planned development and consequently, significant devaluation of the property.
Applying for judicial review can be a simple procedure courtesy of the HM Court Service website and instant access to information and guidance via Google. The court fee for lodging the completed claim form is £50. Statistics published by the Court Service indicate a year on year success rate of approximately 50% for planning law judicial review applications.
How did the purchasers seek to recover their losses?
The purchasers sued their solicitors in negligence for not including within the purchase contract a "call in" clause to ensure that the purchasers would not be bound to purchase the property until after the expiry of the 3 month "call in" period, during which the planning permission was open to challenge and quashing by judicial review.
The claim relied on Volume 38 (2) of the Encyclopaedia of Forms & Precedents, which recommends that the inclusion of a "call-in" clause should at least be considered in any case other than "the very simplest cases such as an application for change of use or for the carrying out of relatively minor building operations where...it is unlikely that the grant of planning permission would be challenged by third parties by way of judicial review...".
The Court's findings - 2009
The judgement of the Chancery Division of the High Court was delivered in September 2009.
The court found that the purchaser's solicitor had been negligent in failing to propose a "call in" clause, without having first raised and discussed the matter with the purchaser.
That was not the end of the matter however. On the evidence, the court concluded that the negligence of the solicitors would have made no difference, as notwithstanding that the vendors would not have agreed to include the "call in" clause and delay the sale, the purchasers would have proceeded firstly because of rising property prices and secondly because the risk of any third party challenge - still less of a successful challenge - to any grant of planning permission would have been perceived as being so remote as not to be of any real concern to the purchaser.
The court's conclusion was that the negligence of the solicitors made no difference. The purchaser's claim against the solicitors therefore failed on the basis of insufficient proof of causation. The purchasers were also ordered by the court to pay the defendants costs of £135,000, in instalments.
How could this have been avoided?
First Title offers insurance against most matters affecting legal ownership of property. Where, as in the above case, property transactions are concluded during the 3-month "call in" period after the grant of a planning permission, First Title offers a Judicial Review insurance policy. This is a legal indemnity that provides coverage for loss of market value of the property as a result of the planning permission being challenged and quashed by judicial review. The policy also covers legal costs of participating in a defence to a judicial review challenge as well as coverage of a variety of other losses.
First Title's insurance is provided on a 'no fault' basis. Had the purchasers taken a Judicial Review insurance policy from First Title, the loss in market value to their property would have been covered by a First Title policy.
This and other products are offered by First Title as part of our property due diligence consultancy and insurance business. Our unique combination of in house expertise and insurance capacity has enabled us to provide solutions for planning and property risks to professionals and their clients for a variety of developments.