Morrell and Another v Stewart and Another

In this case the claimants and the defendants appear before me in person. Each side however had legal advice throughout the claim and until recently before the trial. In particular the pleadings on both sides were drafted professionally by solicitors. The claimants claim damages for fraudulent or negligent misrepresentation, alternatively in breach of contract, in connection with the purchase by them of the Croft House Kennels and Cattery in Heckdyke. Heckdyke is, I understand, a little to the north of Gainsborough.

The premises consist of a house with a boarding kennels and cattery business on the surrounding land. They were purchased in December 2007 at a total price of £320,000 pursuant to two contracts, one of which was for the land and based on the Standard Conditions of Sale, and the price under that contract was £270,000 which was apportioned as to £215,000 to the house and adjoining garden and £55,000 to the kennels, cattery and outbuildings which surrounded the house. The second contract was for the sale of the kennel and cattery business, which was in a form specially drafted by the solicitors on each side. The price of that contract is £50,000, which was apportioned as to £40,000 to goodwill and £10,000 to fixtures and fittings. There is a list of chattel items attached to the contract as list of fixtures and fittings. On the face of it the items in that list do not appear likely to have been worth £10,000 if they had been sold separately, but nevertheless that was the price provided by the contract. Both these contracts were exchanged on 14 December 2007 and completed three days later on 17 December 2007.

It subsequently emerged relatively quickly that there were problems with the foul drainage on the property. The evidence is that the house and some of the kennels, but not all of them, drained into a septic tank, and the claimants discovered soon after they moved in that an overflow from that tank was allowing effluent to flow onto the adjacent land owned by the Isle of Axholme Internal Drainage Board, into a dyke from which it was pumped away by a pumping station. The claimants were advised by the Environmental Agency that this discharge was unlawful and it must cease, and they were told that the defendants had been given a similar warning previously prior to the sale. That warning and the potential issue with the drainage had not been disclosed to the claimants before the contract and specifically had not been mentioned in replies to enquiries before the contract, and it is that that has led to the allegations of misrepresentation.

In presenting the case before me the only live witness evidence I had was from Mrs Morrell on behalf of the claimants and Mr Stewart on the part of the defendants. Mrs Morrell presented the case herself. Mr Stewart was assisted by his family friend, a Mr Anderson. There were two other witness statements filed on the claimants' part, one by a Mr Keeble who was the proprietor of a business who had provided a quote for remedial drainage works and treatment works, and from Ms Williams, a solicitor who had acted for the claimants previously. Neither of those witnesses was called to give oral evidence and I take account of their witness statements as hearsay. Each side had the benefit of expert evidence in the form of written reports by a Mr Newton for the claimants and Mr Cole for the defendants. There was in addition a joint statement by the experts but neither of them was called to give oral evidence.

The background facts are not substantially in dispute. The defendants accept in their joint witness statement that they had had two visits from the Environmental Agency on 12 June 2007 and 25 October 2007 and that in those visits they were told that the discharge must cease and that they agreed at least on the second visit that they would put a stop to the discharge by blocking up the overflow pipe and do so by 25 December 2007. Blocking the overflow to the adjacent land would of course cause any overflow from the septic tank to be diverted elsewhere.

In their witness statement the defendants do not say what preceded these visits, which they describe as informal ones. It does appear however that there is a considerably longer history to the matter. The Environment Agency wrote a letter to the claimants in February 2008 (which I have at page 27 of the bundle) and in that they say (and this is in response to enquiries to the claimants' solicitors), that having looked through their records they could provide the following information:

"In June 2007 we received a report from the Isle of Axholme Internal Drainage Board that water from the kennels was being discharged onto their land and that they had initially reported this to the Bassetlaw District Council Environmental Health Department in April 2006. To my understanding the premises have been visited on a number of occasions by staff from the Environmental Health Department and that they were continuing with their investigation. Further information regarding this aspect may be obtained from the Bassetlaw District Council.

At a site meeting with Mr Stewart on 12 June 2007 attended by myself and a colleague, John Atkey it was found that a combination of effluent from the house and the kennels was being discharged via a pipe onto the land adjacent to the IDB pumping section from where some had got into the watercourse. Mr Stewart was told that the discharge had to cease and he agreed to divert the flow into a soakaway. A further site meeting with Mr Stewart took place on 25 October 2007. At this meeting Mr Stewart agreed to seal off the outflow pipe and divert the flow to a soakaway by 25 December 2007.

[…]

On 10 December I wrote to Mr Stewart requesting written confirmation that the discharge onto the IDB's land had been stopped and the outflow pipe sealed off, and on 24 December we received a letter from Mr Stewart dated 14 December 2007 confirming that the outflow pipe had been sealed and the effluent diverted into a soakaway."

That letter in itself is only hearsay as far as these proceedings are concerned but, that said, I have no reason to think that what is said in it is wrong, and in particular the various matters that are mentioned in that letter were not denied in the defendants' witness statement although they had that letter and had the opportunity to contradict it because it was supplied with the Particulars of Claim. I am satisfied therefore that prior to the Environment Agency's visits during June 2007 there had been a number of meetings and discussions with the Drainage Board and the environmental health department of the council so that the defendant must have been aware of the problem caused by the drainage as a result of those visits.

The defendants disclosed a letter, which is at page 447 of the bundle, and that is the letter from the Environment Agency written on 10 December that has been mentioned in the letter I have just read. It was written to Mr Stewart and it begins with a heading referring to the Water Resources Act 1991 and says:

"I refer to your meeting with myself and Mr Pilkington of Isle of Axholme Internal Drainage Board on 25 October 2007 in connection with the discharge of effluent from your premises onto the land adjacent to the Internal Drainage Board's pumping section and subsequently onto the adjacent watercourse. As I explained at the meeting, under the provisions of the above Act the effluent from the septic tank which serves the house and the kennels and the cattery may not be discharged onto the watercourse. You will recall that you agreed to stop the discharge of effluent onto the adjacent concrete and seal off the pipe within two months of our meeting, i.e. by 25 December 2007. I should be grateful if you would confirm in writing that this has been done."

So that letter was sent and presumably received just before the exchange of contracts on 14 December.

The defendants engaged a local builder, Mr McGuire, to do what they had agreed with the Environment Agency, and Mr McGuire constructed a soakaway under a part of the kennels premises which according to a letter written by him had an area (I think a floor area) of 3.8 square metres, and Mr McGuire said in his letter that he had calculated that figure according to some guidelines that he had found on a website of the Environment Agency. Mr McGuire wrote a letter of 14 December 2007 to confirm that he had completed that work and he also said in that letter that he had blocked up the overflow from the tank which if true would have prevented the outflow onto the Drainage Board's adjacent land. Elsewhere in his correspondence he said he had done this work during November 2007 although he does not give a precise date for having finished it.

Mr Stewart wrote on behalf of the defendants to the Environment Agency on 14 December. That letter was also referred to in the letter that was sent to the claimants. It appears not to have been received until sometime after that but I have no reason to think that it was not written on 14 December, which of course was the date of the exchange of contracts, and in that letter he confirmed that the work had been completed and attached the confirmation letter from Mr McGuire as evidence of that fact. The Environment...