Estate agents — Property Misdescriptions Act 1991 — Property without planning permission described as bungalow — Whether estate agents established statutory defence of taking all reasonable steps and due diligence to avoid misstatement
In January 1994 the respondent estate
agents advertised, and provided sales particulars of, a semi-detached house and
an adjoining building they described as a one-bedroomed bungalow, which their
negotiator believed had been built some 30–40 years earlier. The appellant
council issued two summonses against the respondents alleging contraventions of
the Property Misdescriptions Act 1991 on the grounds that there was no planning
permission for the use of the bungalow as a dwelling-house. On April 25 1995
the magistrates’ court dismissed the summonses; the court found that the
statements in the advertisement and in the sales particulars were misleading,
within the terms of section 1(5)(b) of the Act, but the respondents had
established the statutory defence in section 2(1) that they had exercised due
diligence and had taken all reasonable steps to prevent making the implied
misstatement. The council appealed by way of a case stated.
before the magistrates was that the respondents’ negotiator, relying on what he
saw and his experience, had no real doubt that the bungalow had planning
permission, and any slight misgiving was satisfied by the vendor’s assurance to
that effect. Accordingly, the magistrates were entitled to find that the
respondents had established the statutory defence.
The following cases are referred to in
this report.
Garrett v Boots the Chemist Ltd [1980] LR
238
Sherratt v Gerald’s the American Jewellers Ltd
(1970) 68 LGR 256,DC
This was an appeal by Enfield London
Borough Council by way of a case stated from a decision of the justices for the
Petty Sessional Division of Enfield, who on April 25 1995 dismissed two
summonses against the respondents, Castles Estate Agents Ltd, under the
Property Misdescriptions Act 1991.
Jonathan Fisher (instructed by the
solicitor to Enfield London Borough Council) appeared for the appellants;
Alexander Charlton (instructed by Berrymans) represented the respondents.
Giving judgment, Kennedy LJ said: This is an appeal
by way of a case stated from justices sitting in and for the Petty Sessional
Division of Enfield.
The respondents to the appeal conduct the
business of an estate agency. The trading standards officer for Enfield laid
two informations, as a result of which summonses were issued. It was alleged in
the first information that on January 26 1994, in an advertisement in Property
Week, the respondents had advertised premises at 267 Hoe Lane, Enfield, as
‘a 4 bedroomed extended semi-detached house and one bedroom bungalow’ when no
planning consent existed to use the one-bedroomed bungalow as a dwelling-house.
The second summons related to the
inclusion of substantially the same information in the property’s particulars.
Each summons alleged that there were contraventions of section 1(1) of the
Property Misdescriptions Act 1991 and of the Property Misdescriptions
(Specified Matters) Order 1992.
The case was heard before the justices on
April 25 1995 and it was common ground then, and is today, that in order to
establish the two offences alleged the prosecution had to prove, first of all,
a false or misleading statement; second, in the course of a business; and,
third, about a matter prescribed in the 1992 order. There was, it is also
common ground, available to the respondents a statutory defence set out in
section 2 of the 1991 Act. That statutory defence, so far as material for
present purposes, reads as follows:
(1) In proceedings against a person for
an offence under section 1 above it shall be a defence for him to show that he
took all reasonable steps and exercised all due diligence to avoid committing
the offence.
(2) A person shall not be entitled to
rely on the defence provided by subsection (1) above by reason of his reliance
on information given by another unless he shows that it was reasonable in all
the circumstances for him to have relied on the information, having regard in
particular —
(a) to the steps which he took, and those which might reasonably have
been taken, for the purpose of verifying the information, and
(b) to whether he had any reason to disbelieve the information.
Substantially what the defence put
forward on behalf of the respondent company was that they have exercised due
diligence and taken all reasonable steps to prevent making this implied
misstatement. They said that they had obtained information from the vendors of
the property and they had in the circumstances no reason to doubt it. The
justices found that the statutory defence had been proved and they posed for
our consideration two questions:
(1) Whether there was sufficient evidence
for us to be satisfied on the balance of probabilities that the Respondents had
taken all reasonable steps and exercised all due diligence to avoid committing
the offence, thereby entitling them to rely on the defence contained in Section
2 of the Property Misdescriptions Act 1991.
(2) Whether we erred in law and/or acted
in breach of the rules of natural justice by failing to afford the Appellants
an opportunity of addressing the Court on matters of law concerning the proper
construction to be placed on the provisions of the Property Misdescriptions Act
1991, and in particular Section 2 of that Act, which had been raised during the
course of the evidence placed before the Court by the Respondents in support of
their defence.
Mr Jonathan Fisher, who appears for the
appellants before us, has not addressed us in relation to question (2). He no
longer seeks an answer favourable to his clients in relation to that question,
which I, for my part, would therefore answer in the negative. That leaves
question (1), and question (1) necessarily involves some examination of the
evidence.
The justices set out in para (2) of the
case stated their findings of fact. Some parts of that paragraph I must now
read:
2.1. In January 1994 Mr and Mrs Leppett
instructed the Respondents to market the property they were selling at 267, Hoe
Lane, Enfield. Mr Graham Peter Coton, a senior negotiator, employed by the
Respondents visited the address and spoke to the vendors. He inspected the
property and contemporaneously completed a standard property instruction sheet
which is [exhibited to the case]. The instruction sheet was used as an aide
memoire by Mr Coton in compiling the Property Particulars, [which again are
annexed to the case].
2.2. 267, Hoe Lane, Enfield consisted of
a four bedroomed semi-detached house with a separate single storey building,
which had been built within the curtilage of the main dwelling. The annexe
building was a brick-built construction. It had windows and a front door and
porch. It was set within its own grounds with a low wall dividing it from the
main dwelling and the road. A driveway led from the road. Internally, it had
been fitted out as a one bedroomed bungalow. The physical appearance of the
building, both internally and externally, gave the impression that it was
designed for residential use.
2.3. In the course of his inspection of
the property, Mr Coton asked the vendors whether planning permission had been
granted for the ‘bungalow’ and was advised that it had. He duly recorded the
words ‘perm dev’ on his instruction sheet. This was interpreted by Mr Coton, in
evidence, as meaning ‘permitted development’. Mr Coton also recorded the words
‘Bungalow/Studio Games Room’ on his instruction sheet. The latter reference was
made in order to remind himself as to potential alternative uses which could be
made of the building.
2.4. No further inquiry was made by the
Respondents into the planning status of the ‘bungalow’. The Respondents did not
contact the local authority planning department to verify the information
provided by the vendors.
2.5 On returning to the office, Mr Coton
prepared the property particulars for 267, Hoe Lane, Enfield and arranged for
the property to be advertised locally.
2.6. On 19th January 1994 Mr Coton
arranged for the property particulars to be sent to the vendors together with a
Certificate of Confirmation form [of the type exhibited] and a letter
confirming instructions … The Property Particulars referred to a ‘One bedroom
bungalow located in the grounds of the main dwelling’. The Vendors were
required to sign the Certificate and return it to the Respondents verifying the
accuracy of the information obtained within the Property Particulars. The
letter stated that the Respondents would be unable to commence marketing the
property fully until the certificate was returned. The Vendors failed to return
the Certificate. Shortly after the particulars had been sent a telephone call
was made to the vendors by Mr Coton to remind them to return it. They still
failed to return the form.
2.7. On 26th January 1994 an advertisement
appeared on page 6 of the Property Weekly [sic]in which 267, Hoe Lane,
Enfield was described as ‘A four bedroom extended semi-detached house, plus one
bedroom bungalow’ …
2.8. Neither the Property Particulars nor
the ‘advertisement contained any overt reference to the planning status of the
‘bungalow’ …
2.13. 267, Hoe Lane, Enfield was being
marketed at the same time by a rival firm of Estate Agents, Kings. They were in
the course of drafting the property particulars, when they received information
from an undisclosed source, which aroused their suspicions about the apparent
status of the ‘bungalow’. Consequently, the Vendors were telephoned and
assurance was given by Mr Leppett that planning permission had been granted.
Nevertheless, Kings decided to verify the information with the Planning
Department, who advised them the bungalow did not have the benefit of planning
permission and should not therefore be marketed as a ‘bungalow’. Consequently,
Kings decided to describe the building as ‘a garage arranged as a bungalow’.
There was nothing to suggest that Kings would have investigated the planning
status of the bungalow if they had not received the information provided by the
undisclosed source. The fact that Mr Knipe describes the information as a ‘tip
off’ implies strongly that it was unsolicited rather than part of a routine
follow up of existing doubts.
2.14. Mr Coton was an able and
experienced Senior Negotiator. He had been employed as an Estate Agent for five
years at the time of this incident. Prior to working for the Respondents he had
worked as an Estate Agent with Bairstow Eves. He was entirely familiar with the
Property Misdescriptions Act 1991 and its implications. He describes the Act as
being a daily topic of conversation within the office. He had attended training
courses on the Act and it regularly featured at monthly meetings arranged by
the company. There was no evidence to suggest that Mr Coton had any specialist
knowledge of planning matters, except that which he had obtained in the course
of his employment as an Estate Agent. He believed that planning permission had
been granted for the use of the building as a bungalow.
2.15. Mr Gleeson and Mr Coton [Mr Gleeson
being the managing director of the Respondent company] indicated that vendors
commonly fail to sign and return the Certificate of Confirmation as required.
The majority need to be reminded by way of a telephone call. Some never return
the form. It is therefore common practice within the Estate Agency business for
properties to be marketed before the form is returned. Moreover, according to
Mr Gleeson, the guidelines from the National Association of Estate Agents
indicate that all due diligence has been shown and all reasonable steps have
been taken once the Certificate of Confirmation has been sent. A copy of the
guidelines was not produced to the court.
2.16. Mr Gleeson, the Chairman and
Managing Director of the Respondent Company, was also very familiar with the
Act and its implications. He had attended a number of seminars on the Act and a
workshop run in Enfield by the Office of Fair Trading as well as keeping up to
date with the latest developments in the legislation by way of articles in
Estate Agency periodicals. In 1994, he organised a seminar for all members of
staff on the Act.
Para 2.17 to 2.19 really deal not with
findings of fact but with conclusions of the magistrates’ court as to the
offence charged. They say in para 2.17:
We found that the statements made in the
advertisement and within the property particulars that 267, Hoe Lane, Enfield
consisted (in part), of a one bedroom bungalow were misleading, within the
terms of section 1(5)(b) of the Act in that a reasonable person may be expected
to infer from them that the property could be used for residential purposes.
2.18. The statement was made about a
matter prescribed by the Property Misdescription Act (Specified Matters) Order
1992, namely the fitness for any purpose to which the building could be put; in
this case the suitability of the building to be used as a place of residence in
view of the fact that the planning permission had been refused.
2.19 The Statements were made in the
course of an Estate Agency Business as defined by Section 1 Estate Agents Act
1979.
The case stated then goes on to deal with
the rival contentions of the parties. That, in itself, is a little surprising
because as Mr Alexander Charlton informed us, in reality neither side addressed
the magistrates’ court. However, Mr Charlton, who was present in the
magistrates’ court, is content, for his part, with the summary of what at least
he would have said and it is unnecessary for present purposes to recite the
arguments which are set out in the case stated itself, or to set out any
further than I have done already the conclusion reached by the magistrates.
The words used in section 2(1) of the
statute are in fact familiar words in trading standards and other like
legislation. Section 2(2), in my judgment, adds nothing substantial to the
obligations of a defendant who seeks to avail himself of the statutory defence
to be found in section 2(1). All that subsection (2) does is to make it clear
what is the relatively limited scope of the statutory defence, and a number of
decided cases emphasise the limited scope of that statutory defence. For example,
in Sherratt v Gerald’s the American Jewellers Ltd (1970) 68 LGR
256 Lord Parker CJ was considering a case where jewellers had stocked a watch
which they alleged to be waterproof but had made no tests in relation to it. He
said that, at p259, in relation to the statutory defence, worded in exactly the
same way as the statutory defence with which we are concerned:
That they (the jewellers) took no
precautions at all is clear; they relied solely on their previous dealings with
the wholesalers. It seems to me that if they are to succeed here, they must
show on a balance of probabilities that although no precautions were taken,
there were no reasonable precautions that could be taken.
A little later he said:
… there is clearly an obligation to take
reasonable precautions if there are any precautions which are reasonable that
can be taken.
Similarly, in Garrett v Boots
the Chemist Ltd [1980] LR 238 Lord Lane CJ, together with Comyn J, was
considering a case where it was alleged that Boots the Chemist had sold pencils
with an amount of lead above that which was permissible in this country. The
defence put forward was that the company (ie Boots) was entitled to rely on
the oral assurance of its suppliers that the goods supplied would conform with
the United Kingdom’s regulations and that it was unreasonable to expect the
company to have established a system of random sampling.
In that case the Lord Chief Justice
quoted what had been said by Lord Parker in Sherratt and a little later
he said:
‘All reasonable precautions’ are strong
words … every case will vary in its facts … One does not know whether the
random sample would have in fact produced detection of the errant pencils. It
might have, it might not have. But to say that it was not a precaution which
should reasonably have been taken does not seem to me to accord with good
sense.
As I have just indicated, in Garrett
the Lord Chief Justice said that ‘every case will vary in its facts’. That must
certainly be so in the field of estate agency. If in the present case we were
dealing with a bungalow in its own curtilage, built 30 or 40 years ago and
occupied since but, in fact, built without planning permission, it would not be
difficult to envisage someone in the position of Mr Coton not even asking the
vendor about whether it had been built with planning permission. The
advertisement and particulars would then, no doubt, be drawn up in
substantially the form in which they appear in the present case. A magistrates’
court would be entitled to find that the advertisement in the particulars was
in breach of section 1 of the 1991 Act for the same reason the justices found
that there was a breach in the present case.
If the statutory defence was then raised,
assuming no bad faith on the part of the estate agent, then the magistrates’
court would surely, in my judgment, be entitled to find the statutory defence
proved because in those hypothetical circumstances there would have been no
steps which would have been reasonable to take to avoid committing the offence
and due diligence would have required no further action.
Conversely, if, when Mr Coton went to the
vendor’s home he had seen what was plainly a newly completed and ugly extension
tacked on to the side of a house in a conservation area, due diligence, as it
seems to me, would require him to inquire as to the planning position before
asserting, albeit by inference, that planning permission existed. Also, because
the statute would only avail him if he took all reasonable steps and exercised
all due diligence, relying on an oral assurance given to him by the vendor
would in those circumstances be, in my judgment, unlikely to suffice because
the trading standards officer could so easily point to other steps that the
estate agent could have taken, for example, by asking to see the planning
consent or inquiring of the local planning authority to obtain what the statute
itself describes as verification of the information provided to him by the
vendor.
Much attention in this case has been
devoted to the certificate of confirmation: the procedure for getting the
vendor’s written agreement to the advertisements and particulars before they
are used. For the purposes of subsection (2) I, for my part, would attach
relatively little weight to that step, assuming that the particulars, as in
this case, merely recited what the vendor had already said. It seems to me that
sending the particulars, in effect, back to the vendor for the vendor’s
signature would not of itself amount to any form of verification of the
information which orally the vendor had already supplied. However, in some
circumstances it could be a modest step within the contemplation of section
2(1). Therefore, the vital question in the present case would be, as it seems
to me, whether at the time of Mr Coton’s visit the circumstances were such as
to raise in his mind (that is to say in the mind of a competent estate agent in
his position) any doubts as to the planning position.
In cross-examination Mr Coton said (and
the note of evidence is a part of the case stated):
I would have been alerted about planning
permission if for instance the property was stuck on the side or didn’t look
right or it had no access, but in this case it was a perfectly good bungalow
situated within it’s own ground. The bungalow was not brand new. In my opinion
it been there a number of years. It wasn’t occupied at that moment but it
appeared that it had been occupied previously, so I was not suspicious.
It is clear to me, reading the whole of
the case stated and the notes annexed to it, that the magistrates accepted that
part of Mr Coton’s evidence, as they were entitled to. The question then, of
course, does arise as to why Mr Coton asked about planning permission at all.
The answer to that seems to be that, although he did not believe that there
was, in fact, any problem, his experience as a sales negotiator was such as to
cause him to think that it might be prudent just to ask, so he did so. Having
received the answer that he expected, any small doubt that he may have had was
thereby completely resolved. If that be a correct interpretation of facts then,
as it seems to me, the magistrates were entitled to find the statutory defence
proved, because Mr Coton was not relying on what he was told by the vendor but
upon his own assessment of the situation supported, to a small extent, by what
he had been told by the vendor. Of course, all of this has to be considered
against the background that Mr Coton would know that in the event of a sale the
whole matter would have to be investigated by anyone acting on behalf of the
purchaser in the course of the sale itself.
If the justices had found that Mr Coton
had, or ought to have had, any real doubt as opposed to the slight misgiving to
which I have already referred (if indeed it can be described as such) as to the
existence of planning consent, then, as it seems to me, the justices could not
properly have found the statutory defence to be made out because there was so
much that could have been done. In particular, the negotiator, Mr Coton, could
have asked the vendor to produce the planning consent, or he could have
inquired of the local planning authority which, on the evidence, were in a good
position to speedily provide information if asked to do so.
If Mr Coton had been at fault the
question would arise as to whether, nevertheless, the respondents (the company,
which were themselves the defendants in the proceedings) would be able to avail
themselves of the statutory defence. That would inevitably involve investigating
properly the extent to which the company took precautions to avoid committing
the statutory offence.
For my part, I doubt if, on the evidence
which was led before the magistrates, the company, had Mr Coton been at fault,
would have been able to avail themselves of the statutory defence. There was,
of course, a considerable amount of evidence to show that the company did train
its personnel and took considerable steps in that direction, but there was, so
far as I can ascertain, no evidence directed to the point which it was
necessary to explore further, in relation to any vendor for whom employees were
acting, namely the existence or non-existence of planning permission. That, at
the end of the day, in my judgment, is the starting point for the investigation
in the present case.
For those reasons and on the unusual
facts of this case I, for my part, would be prepared to answer the first
question posed by the justices in the affirmative and, accordingly, I would
dismiss this appeal.
Forbes J agreed and did not add
anything.
