Hi Laverne,
Just wanted to say that I was in a very similar situation to you, with no proof that the vendor had ever complained about the problem (I need to be vague, the lady could be on mumsnet). I still sued (this was 3 years ago now.
I painstakingly collected information from neighbours etc, trawled old threads on the internet for any possible reference to that neighbour. I did not have concluding proof but I went ahead anyway.
I hired a very hard nosed solicitor and I ended up getting about 10% of the value of the house back, although I spent about 2.5% of the house value on solicitor and surveyor fees (they will have to value the property with and without the annoyance).
The solicitor told me at the time that very, very few cases reach court stage and normally people settle in advance. We also settled. All-in court costs can reach 150k or more.
My situation was complicated by the fact that the couple selling were divorcing and they could not sit in a room with each other (not that I cared) .
I am extremely happy with what I did, I would always have felt cheated and now I still feel cheated but less so.
Also, despite hating the house because of the neighbour, I did it up completely (new kitchen, new extension, loft conversion) spending the full compensation money. The house was like a show house as I wanted to sell.
We sold one year ago, making about 50% of the original price paid as the buyers fell in love with the decor and the house. We obviously declared the problem straight away.
We then bought a smaller place in a really top location, and now we are excavating the basement to have a massive kitchen/diner. And there are no neighbours from hell.
What I am trying to say is that you need to collect information from the neighbours (in writing). Some will not want to do it as they will have then to declare the problem themselves, but others will.
The question on the SPIF is very clear and asks about also potential issues. This is clearly an issue, even though the vendor never went to court with the restaurant owner originally.
Good luck!