Saunders v Edwards

JurisdictionEngland & Wales
JudgeLORD JUSTICE KERR,LORD JUSTICE NICHOLLS,LORD JUSTICE BINGHAM
Judgment Date13 March 1987
Judgment citation (vLex)[1987] EWCA Civ J0313-1
Docket Number87/0240
CourtCourt of Appeal (Civil Division)
Date13 March 1987
Between:
(1)Philip Saunders
(2)Bryan Joan Elliott
Plaintiffs (Respondents)
and
(1)Royston Griffith Edwards
Defendant (Appellant)
(2)Martin A. Ross
Defendant

[1987] EWCA Civ J0313-1

Before:

Lord Justice Kerr

Lord Justice Nicholls

and

Lord Justice Bingham

87/0240

1984 S No. 2389

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

(HIS HONOUR JUDGE RUBIN, SITTING

AS A JUDGE OF THE HIGH COURT)

Royal Courts of Justice

MR. RICHARD SPEARMAN (instructed by Messrs. Halliwell Rodwell, Solicitors, London W1M 7HE) appeared on behalf of the First Defendant (Appellant)

MISS CAROLINE HUTTON (instructed by Messrs. Parfitt Cresswell & Wilson, Solicitors, London SW6 1EU) appeared on behalf of the Plaintiffs (Respondents)

LORD JUSTICE KERR
1

This is an appeal from a judgment of His Honour Judge Rubin sitting as an additional judge of the Chancery Division, which he gave on 18th November 1985. The dispute arose out of the sale by the first defendant ("the defendant") to the plaintiffs of the lease of a flat after the defendant had fraudulently represented that it included a roof garden. The judge awarded the plaintiff £7,000 as damages for the fraudulent misrepresentation and an additional £500 for inconvenience and disappointment, in each case with interest at the rate of 12 1/2 the date of the writ.

2

The defendant does not appeal against the finding of fraudulent misrepresentation. But he contests the plaintiffs' entitlement to damages, which he submits necessarily involves reliance upon illegal conduct on their part. As regards the award of £500, he disputes the award of interest on it as a matter of principle, or alternatively submits that interest should only be awarded at a conventional rate of 2.0%.

3

The original lease was concluded between other parties on 23rd July 1975, for 99 years of a second floor flat at 18 Redcliffe Street, London SW10. A plan was attached, but difficult to decipher. The defendant became the tenant in 1979. He found a flat roof at the back with no direct access to it, overlooked by a sash window. He removed this, replaced it with french windows, and erected an iron staircase from the roof to an iron platform, so that one could get down to the flat roof. He put some fencing and lattice work around the roof so as to create a roof garden or patio, and added some pots and plants.

4

His then landlord was a Mr. Delamain, who gave evidence. He strongly objected to Mr. Edwards' extending his occupation of the flat to the roof. There was some acrimonious correspondence, including solicitors' correspondence, in 1982. Although the plan is unclear, there is no doubt that the demised premises did not include this roof terrace. Mr. Edwards knew this perfectly well when he decided to sell his lease in 1983. He instructed estate agents, Messrs. May & Co, but did not tell them that the roof terrace was not included. They prepared particulars which mentioned the terrace and its attractions three times. The asking price was £46,000, including carpets and curtains, and some kitchen shelving and units, as fixtures and fittings, as well as a cooker and a refrigerator. I shall refer to these items as "the chattels". The plaintiffs were getting married and interested in the flat; in particular they were very keen on the roof terrace. When they were shown around by Mr. Edwards he took them out on the roof. On 24th May 1983 they agreed to buy the flat, subject to contract, at a price of £45,000, including the chattels.

5

The plaintiffs instructed a Mr. Martin Ross of Worthing to act as solicitor on their behalf. When it subsequently became apparent that the roof terrace was not included they joined him as a defendant on the basis that he should have spotted this and warned them. But that claim was discontinued and it is not now suggested that he was in any way negligent in his interpretation of the lease and plan.

6

In the event the list of chattels was slightly extended and agreed, but it is clear that it included nothing of great value.

7

To complete the fraudulent misrepresentation, the answers to preliminary enquiries given by Mr. Edwards' solicitors with his authority included a statement that no correction fell to be made to the particulars circularised by the estate agents.

8

I now come to the point which assumed great importance in the argument. At the request from the side of the plaintiffs, the total price of £45,000 was apportioned as to £40,000 for the lease and £5,000 for the chattels. That arose in the following way. Initially, on being asked in the preliminary enquiries whether the vendor had any suggestion to make about the apportionment of the price, the answer was non-committal. But one can see what then happened from a letter from Mr. Edwards' solicitors to him of 28th July 1983, which included the following:

"The purchasers want to apportion the price as to £40,000 for the flat and £5,000 for fixtures and fittings. This is merely so they can avoid paying extra stamp duty and does not affect you financially. Would you please, however, confirm that the fixtures and fittings you are leaving could be worth something in the region of £5,000".

9

Mr. Edwards' reply was as follows:

"I mentioned this to Tom"—a friend—"after I spoke to you about it, because he has visited my flat. He feels that the fittings could be worth £5,000. (I forgot to mention to you curtains and blinds and shelving, and a few other things). So I think unless you have serious misgivings I am prepared to describe them as £5,000 worth".

10

This resulted in the following being added to the additional enquiries before the exchange of contracts. The vendor's solicitors wrote:

"Please confirm that the price may be apportioned as to £40,000 for land and buildings and the balance of the purchase price for fixtures and fittings"

11

and the reply was "very well".

12

Finally the position was explained to the plaintiffs by Mr. Ross, their solicitor, on 16th September 1983 in the following terms:

"I have had the price apportioned as to £40,000 as to land and buildings and balance for fixtures and fittings. This will save you approximately £300 of stamp duty".

13

Contracts were then exchanged on 12th October 1983. They provided for a purchase price of £40,000, a deposit of £4,000, a balance of £36,000 and in addition £5,000 for the chattels, making a total of £41,000 payable on 9th November 1983, when completion took place.

14

Thereafter, to their considerable annoyance, the plaintiffs were told that they had no right to use the roof garden. They issued their writ in May 1984 and claimed recission of the contract, or alternatively damages for fraudulent misrepresentation; but the claim for recission was abandoned at the trial.

15

Both sides were in agreement about the applicable measure of damages, which has been most recently reviewed by this court in Doyle v. Olby Ironmongers, [1969] 2 Queen's Bench 158. It is convenient to read a summary from McGregor on Damages, 14th Edition; paragraph 1459:

"…..the correct measure of damages in the tort of deceit is an award which serves to put the plaintiff into the position he would have been in if the representation had not been made to him, and not, as with breach of condition or warranty in contract, into the position he would have been in if the representation had been true. In other words, if the plaintiffs has been induced by the deceit to conclude a contract, he is not entitled, as he is in contract, to recover in deceit for the loss of his bargain".

16

In paragraph 1471 under the heading "normal measure", the position is stated in one sentence:

"The normal measure of damages is the value transferred less the value received, whether of property or of services".

17

There is also no dispute about its application to the facts of this case. If the false representation had not been made the plaintiffs would not have bought the flat and would therefore not have parted with £45,000. That was the value transferred. They must give credit for the value received, and the issue was accordingly as to the value which they received.

18

That was complicated by two factors. First, in relation to the chattels there was the complication of the apportionment of the price which attributed £5,000 to them, and of the evidence as to their true value. Secondly, the position was complicated by the fact that the value of the flat increased between the time when the false representation was made in May 1983, and October 1983 when contracts were exchanged, and again by November 1983, when the sale was completed.

19

Before dealing with these issues it is convenient to refer to the evidence about them. First, with regard to the chattels I must read part of the evidence of Mr. Saunders, the first plaintiff:

"(Q) If those fixtures and fittings had not been included in the sale, what would have been the consequence to you? (A) It would have had virtually no bearing whatsoever on our interest in the property. It would not have deterred us. Perhaps we would have been motivated to try to agree a slightly lower price. (Q) By how much? When you say slightly lower, are you talking about £10,000, £1,000, £100 or £1? What order of magnitude are we dealing with? (A) £500 maximum or maybe £1,000. It is doubtful if it would have spoiled the transaction at all if it had come to hard-pressed negotiation. We would quite gladly have agreed to the same price".

20

Mr. Edwards was asked about the apportionment in relation to the passage which he wrote in reply to his solicitor's letter, which I have already read. He said:

"That relates to the purchasers wanting to save something on the stamp duty and they...

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    ...in three subsequent cases the principle so accepted by Hutchison J. was adopted and expanded by the Court of Appeal. The first was Saunders v. Edwards [1987] 1 W.L.R. 1116. The case was concerned with a claim by the purchasers of the lease of a flat against the vendor for damages for fraud......
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