Cleaver v Schyde Investments Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Etherton,Lord Justice Longmore,Lord Justice Laws |
| Judgment Date | 29 July 2011 |
| Neutral Citation | [2011] EWCA Civ 929 |
| Court | Court of Appeal (Civil Division) |
| Date | 29 July 2011 |
| Docket Number | Case No: B2/2010/2642 |
[2011] EWCA Civ 929
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON COUNTY COURT
His Honour Judge Dight
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Laws
Lord Justice Longmore
and
Lord Justice Etherton
Case No: B2/2010/2642
Chy08460
Mr Alan Johns (instructed by Norris Bazzard & Co) for the Appellant
Mr Tom Leech QC and Ms Philomena Harrison (instructed by W Davies & Son) for the Respondent
Hearing dates: Tuesday 12th July 2011
Introduction
This is an appeal from the order of His Honour Judge Dight in the Central London County Court dated 21 October 2010 by which he ordered that, as a result of the appellants' innocent misrepresentations, a contract for sale dated 13 December 2007 ("the contract") by the appellants to the respondent of land on the north side of Windsor Road, Wraysbury TW19 5DE ("the Property") was rescinded; the appellants must repay to the respondent the deposit, together with statutory interest; and he dismissed the appellants' counterclaim for specific performance of the contract or damages for the failure to complete it.
The issue turns on whether the Judge was right to conclude that Condition 7.1.3 of the Standard Conditions of Sale (4th ed) ("the Standard Conditions"), which were incorporated into the contract, was of no effect on the facts of the case because it failed to satisfy the requirement of reasonableness in section 3 of the Misrepresentation Act 1967 ("the 1967 Act"), as described in section 11(1) of the Unfair Contract Terms Act 1977 (" UCTA").
Condition 7 of the Standard Conditions
Condition 7 of the Standard Conditions is as follows, so far as relevant:
"7. REMEDIES
7.1 Errors and omissions
7.1.1 If any plan or statement in the contract, or in the negotiations leading to it, is or was misleading or inaccurate due to an error or omission, the remedies available are as follows.
7.1.2 When there is a material difference between the description or value of the property, or any of the chattels included in the contract, as represented and as it is, the buyer is entitled to damages.
7.1.3 An error or omission only entitles the buyer to rescind the contract:
(a) where it results from fraud or recklessness, or
(b) where he would be obliged, to his prejudice, to accept property differing substantially (in quantity, quality or tenure) from what the error or omission had led him to expect."
The statutory provisions
Section 3 of the 1967 Act provides as follows:
"3 Avoidance of provision excluding liability for misrepresentation
If a contract contains a term which would exclude or restrict –
a) any liability to which a party to a contract may be subject by reason of any misrepresentation made by him before the contract was made; or
b) any remedy available to another party to the contract by reason of such a misrepresentation,
that term shall be of no effect except in so far as it satisfies the requirement of reasonableness as stated in section 11(1) of the Unfair Contract Terms Act 1977; and it is for those claiming that the term satisfies that requirement to show that it does."
Section 11(1) of UCTA provides as follows, so far as relevant:
"11 The "reasonableness" test
(1) In relation to a contract term, the requirement of reasonableness for the purposes of…section 3 of the Misrepresentation Act 1967…is that the term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made."
The facts
The appellants are the registered owners of the Property. For many years the Property was used for a garage business conducted by the first and third appellants (father and son) under the name Concorde Garage. The transaction started when Lavender Homes Limited ("Lavender"), which was involved in the acquisition and development of residential sites, identified the Property as a possible development site. The respondent was introduced into the transaction to front it for Lavender, and for which it was to be paid a fee. Lavender intended to make an application to the local planning authority to develop the Property into flats.
A local General Practitioner, Dr Watts, was interested in developing the Property as a medical centre and purchasing it for that purpose.
An oral agreement was reached with the appellants for the sale of the Property to the respondent for £850,000, with completion delayed for 6 months so that Lavender could obtain planning permission and the appellants could wind down the garage business. The appellants, the respondent and Lavender all separately instructed their own solicitors.
On 5 November 2007 the respondent's solicitors asked the appellants' solicitors to obtain the appellants' replies to Commercial Property Standard Enquiries ("the Standard Enquiries"). The following was stated in Paragraph F of the introduction to the Standard Enquiries:
"The seller confirms that pending exchange of contract or where there is no prior contract pending completion of a transaction, it will notify the buyer on becoming aware of anything which may cause any reply that it has given to these or any such supplemental enquiries to be incorrect."
The relevant Standard Enquiries for the purpose of these proceedings were those in 12.11 and 12.13. They were preceded by Standard Enquiry 12.1 as follows:
"Please supply a copy of any planning permission, proof of reserved matters, building regulations approval, building regulations completion certificate, listed building consent and conservation area consent which relates to the property and of any consent to the display of advertisements at or from the property (each a consent)"
Standard Enquiry 12.11 was as follows:
"Please provide details of any application for a consent order certificate which: (a) has been made but not yet decided; (b) has been refused or withdrawn; or (c) is the subject of an outstanding appeal."
Standard Enquiry 12.13 was as follows:
"Please supply a copy of any letter or notice under planning legislation which has been given or received in relation to the property."
On 19 November 2007 the appellants' solicitors sent replies to the Standard Enquiries. In relation to Standard Enquiry 12.11 the response was "There are none". In relation to Standard Enquiry 12.13 the response was "None given or received".
Two days later, on 21 November 2007, a planning consultant for Dr Watts came to the Property and handed the first appellant an envelope containing notice of a planning application by Dr Watts for the erection on the Property of a health centre and four flats. The first appellant telephoned his solicitor, Mr Solomon, to inform him. Mr Solomon did not ask him for a copy of the planning notice and told the first appellant not to worry about it. The Judge found that the first appellant appreciated that the planning application was something that might matter to a purchaser. It is common ground that, in failing to correct the answers to Standard Enquiry 12.11 and 12.13 in the light of Dr Watts' planning application, the appellants made misrepresentations.
Contracts were exchanged on 13 December 2007 for the sale of the Property to the respondent for £850,000, with a deposit of £85,000 being paid. Completion was fixed for 1 June 2008. The contract incorporated the Standard Conditions. Condition 7 of the Special Conditions set out various agreed variations to the Standard Conditions. Condition 12 of the Special Conditions was as follows, so far as relevant:
"12. It is hereby agreed and declared that this Agreement includes the entire terms of the agreement for sale and purchase of the Property and that no warranty or statement whether oral or implied made by or on behalf of the Seller shall be capable of being treated as forming part of the said terms or as an inducement by the Seller to the Buyer to enter into this Agreement or as a warranty in relation to the subject matter thereof or be grounds upon which the Buyer shall base any claim against the Seller save that this clause shall not apply to written replies given by the Seller's Solicitors to the Buyer's Solicitors written pre-contract enquiries and written information contained in Commercial Property Standard Enquiries Forms…supplied by the Seller's Solicitors to the Buyer's Solicitors."
The first appellant, having been told by Dr Watts that he was going to pursue his planning application notwithstanding that the Property had been sold, telephoned Mr Solomon on 8 January 2008. The Judge found that in that conversation the first appellant expressed both his concern about Dr Watts' planning application and his fears that it might, in some way, affect the sale even though contracts had already been exchanged.
At Mr Solomon's request the first appellant sent him a copy of the notice of the planning application. Mr Solomon forwarded it to the respondent's solicitors. Mr Short, a director of Lavender, became aware of the notice at the same time. The evidence given on behalf of the respondent was that, when its director, Mr Hyde, became aware of the planning application, he formed the view it was very bad from the respondent's perspective because, if the local community wanted a health centre and obtained planning permission for it, that would be the most likely use which would be permitted for the Property. Mr Short was also very concerned about the application. Mr Williams, a planning consultant, advised...
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