News Flash: Judgement in Ovington Square garden access case

WITHERS LOSES IN OVINGTON SQUARE CASE
May 30, 2012
In the High Court case of Ovington Square residents Jeffrey and Mina Herrmann vs. Withers LLP law firm, the Hon. Mr. Justice Newey ruled today that Withers, and in particular solicitor Miss Emma Copestake, had been negligent when the firm claimed the house the Herrmanns were buying had communal garden access rights. However, the judge awarded Mr. and Mrs. Herrmann just £310,000 in damages, interest and costs, a fifth of the £1.5 million they had sought.

Mr. Justice Newey ruled that the American couple should have done more to mitigate their losses when they discovered there was a doubt about whether their house had access rights. In his 38-page judgement he ruled that the Herrmanns were wrong not to negotiate a 50- or 80-year license with the Ovington Square Garden Committee which would have allowed the house's occupants to have garden access rights over that period of time.

The judge estimated the house was worth £340,000 (5 percent) less than the £6.8 million purchase price once it became clear it had no access rights, but if a 50-year license had been negotiated, it would have been worth just £65,000 less. (The Herrmanns had argued that the drop in value because of no garden access represented £700,000, or more than 10 percent of the purchase price.) The judge ruled, "I consider that I should award damages of £65,000 in respect of the difference between the value of 37 Ovington Square with a statutory right, and its value with a 50-year lease." The rest of the £310,000 award was composed of compensation for legal fees the couple had incurred in trying to resolve the access question,interest charges,the estimated £25,000 cost of a 50-year license if they had bought one,and various other smaller costs.

Commenting on the outcome, Mr. Herrmann said,"We are delighted with this verdict after nearly four years of struggle with Withers. Withers’ complete failure to do their job in a professional manner has now been declared by a judge of the High Court. We were shocked that a business that advertises itself as “the leading law firm for successful people” could behave so badly for all these years. Withers' persistent refusal to accept that their advice was negligent and their failure to take responsibility for the harm caused by their lack of care meant we had to seek satisfaction in court, in heavily contested proceedings lasting eighteen months. Now with this judgment we have been vindicated.”

Withers made no comment on the verdict.

To read the full 38-page judgement go to www.bailii.org and look on the left side of the page for the "New cases of interest" category. The case is listed under the names of the claimants and defendant, but can also be found via the document number, [2012] EWHC 1492 (Ch) Further background on the case can be found in back issues of Garden Square News – Spring 2009, Spring 2010, Autumn 2010, Spring 2011, Autumn 2011 and Spring 2012.

The legal teams involved in the case were: Mr Jonathan Seitler QC and Mr. Benjamin Faulkner (instructed by Jones day) for the Claimants, and Mr. Michael Pooles QC and Mr. Paul Mitchell (instructed by Reynolds Porter Chamberlain LLP) for the Defendants.

May 30, 2012 | Garden Square News

One must have some sympathy for the Herrmanns and ignore some of the wilder and hostile comments made by contributors on the Daily Mail site to the effect that Americans are too litigious and garden squares ought to be open to all. However, one point in the judgment does worry me.

The Herrmanns were badly misled by the estate agents' assertion that they had a right of access to the gardens. 

Then they were allowed to go through to buying the property by their own lawyers, Withers, who did not draw their attention to a possible flaw in their supposed right to access believing the Herrmanns had a statutory right to access to the gardens.

Then acting on their belief they had a right of access bolstered by a strong legal advice from counsel, the Hermanns pursue that right against the garden committee and the LB of K and C only to lose and suffer costs. 

Finally they establish negligence against Withers only to be told, they should not have pursued their claim against the garden committee and the LB committee and will have their damages against Withers severely cut because they should have negotiated a licence to use the garden.

Had they paid out £25,000 for a 50 or 70 year licence, they still would not have had the valuable asset they thought they had bought and which they were advised they had a right to? What interests me is what should have happened if they had accepted a licence.

They are now out of pocket for the licence and the difference in value of a house with a perpetual right of access and one with a licence to use the gardens. How do they recover that loss? If they sue Withers for negligence, Withers might argue that the Herrmanns did not suffer any loss as they had a statutory right of access which they should have pursued with the garden committee and the LB of K and C. The issue would have had to be litigated, probably with the garden committee and the LB of K and C being involved. Yet the court on this occasion decided they could not recover such costs after they did not pursue the licence option.

It seems to me that the Herrmanns took the logical steps in the litigation but are made to suffer substantially in damages. I hope I have understood the judgment correcly but it does appear rather harsh on the issue of mitigation of damage.


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June 4, 2012 | Stephen

The comment by Stephen expresses a worry about the aspect of the judgment dealing with mitigation of damages. As a party to the case, I cannot pretend to be impartial, but I agree with Stephen that the judgment is worrisome in that regard. 
A crucial issue in the case was how much the market value of our house was diminished by the absence of the statutory rights to use the garden and to sit on the Garden Committee, and to what extent a 50 or 80 year license to use the garden, with no right to sit on the Garden Committee, would restore some of the lost market value.
In all, four property experts were engaged to consider this question, two by us in 2009, one by us for the trial of the case against Withers, and one by Withers. The four experts produced four distinctly different, highly subjective opinions. Their opinions were subjective because there is absolutely no market data showing the sale prices of pairs of comparable houses, one with statutory garden rights and the other with only a limited license to use a garden. 
The officers of the Ovington Square Garden Committee suggested that if we would agree to pay another £25,000 for the garden rights that, thanks to Withers negligent advice, we thought we had already bought, the officers would recommend to the full Garden Committee, consisting of over 100 statutory users of the garden, that such a license should be authorised. In nearly sixty years of existence, the Garden Committee had never authorised a single such license by the required legal process. (This is not to say that no officer of the Committee had ever unlawfully given out keys to people lacking a statutory right.)
The discounted present value of 80 years of the statutory garden levy was about £2,400, i.e., less than a tenth of what we were asked to pay for 50 years of lesser rights under a license. We offered to pay that sum and when it was rejected by the officers we invited negotiation over the price of a license, but the Garden Committee's officers never budged from their opening demand of £25,000. At trial it was admitted that the £25,000 figure was chosen by the Garden Committee's officers with a view to enable improvements to be made to the garden. In effect, then, money for improvements to the garden was to come from us alone. One assumes the 100 statutory users wouldn't plump for the improvements to their garden from their own pockets. 
The judgment held we were unreasonable in not handing over the £25,000 and dropping our suit for a declaration that we had a statutory right to use the garden, as Withers had unequivocally but wrongly advised us. 
At the time the decision was contemplated by us, we were faced with the unresolvable uncertainty as to how much market value we would recover through the purchase of an unprecedented license, (assuming it would even have been properly authorised by the Garden Committee by the necessary two-thirds vote at two consecutive extraordinary meetings). In the face of that uncertainty, a predicament caused by Withers' negligence, we declined to pay the demanded amount. We continued to invite the Garden Committee to engage in a dialogue about the price demanded, but they refused. We went to trial, and Withers' opinion interpreting the statute proved to be wrong.
Three of the four property experts thought the hypothetical license might have improved the market value of our house by more than the cost of the license but by less than the full loss of market value due to the absence of statutory rights. Oddly, Withers' expert indicated in his report that paying £25,000 cash for a license would, in his opinion, raise the market value of our house by only £25,000 -- hardly an economically compelling choice. If his opinion were correct, it is hard to see how failure to pay for such a license is an unreasonable failure to mitigate damages, as there would have been no mitigation at all.
The facts I set out above were undisputed at the trial. Mr Justice Newey, an extremely thoughtful and conscientious judge, was the finder of fact on the question of our reasonableness in regard to mitigation of the damages Withers caused us to suffer. He concluded that in these circumstances we were unreasonable in not agreeing to pay £25,000 for the license that the Garden Committee might hypothetically have authorised. I respectfully disagree with his finding. I do agree with Stephen's comment that the judgment "does appear rather harsh on the issue of mitigation of damage."

June 22, 2012 | Jeffrey Herrmann