Sale of land – Construction of contract – Sale including fixtures and fittings – Claimant purchaser inspecting property – Various fixtures and fittings removed following inspection but before exchange of contracts – Whether claimant entitled to abatement of sale price – Whether sale including fixtures and fittings present at date of inspection or date of exchange – Whether defendant vendor bound by state of property at date of inspection in absence of fraud – Preliminary issue decided in favour of defendant; trial directed on fraud issue
The claimant agreed to purchase an unoccupied property from the defendant, which was selling as mortgagee in possession. He had carried out a detailed inspection of the property in June 2006, which had revealed that part of the hall fireplace had been removed, the dining room fireplace was missing and certain other renovation works were needed. In July, the defendant’s agent telephoned the claimant to press him for an early exchange of contracts and to inform him of an increase in price by £100,000 to £1.3m. The claimant agreed to exchange at the higher price and contracts were exchanged the same day. The sale agreement incorporated the standard conditions of sale (3rd ed) and various special conditions, which provided: (i) by special condition 4, that the buyer had inspected the property and had not been induced to enter into the contract by any warranty made by the seller other than those contained in written replies to enquiries raised by the buyer’s solicitor; (ii) by special condition 13, that the sale included all fixtures and fittings; and (iii) by special condition 16, that the property was sold in “its present state and condition”.
Thereafter, the claimant discovered that further items had been removed from the property, including three fireplaces, many doors, kitchen and bathroom equipment, a hot water cylinder, copper piping, chandelier, carpets and stair rods. He claimed that he was entitled to an abatement of the sale price on the ground that the fixtures and fittings included in the sale were those present on the property at the date of his June 2006 inspection rather than at the date of exchange. The defendant relied on special conditions 4, 13 and 16 in support of the contrary view.
A preliminary issue was tried as to the proper construction of the sale agreement. The claimant argued, in reliance on Taylor v Hamer [2002] EWCA Civ 1130; [2003] 1 EGLR 103; [2003] 03 EG 127, that the June 2006 inspection had led him reasonably to believe that what he saw was what he was contracting for and that this was sufficient to bind the defendant to sell on that basis even if it was unaware of the subsequent removal of further items.
There was also a dispute of fact, not resolved at the preliminary hearing, as to whether the defendant had known, or had informed the claimant, about additional damage to a fireplace prior to exchange of contracts. The claimant asserted that the defendant had only mentioned in passing that it had been informed of damage to a fireplace, from which he had assumed that the damage was that of which he was already aware.
Held: The preliminary issue was determined in favour of the defendant; a further trial was ordered on the issue of fraud.
(1) The defendant was not bound to sell on the basis of the claimant’s June 2006 inspection unless the claimant could establish fraud on its part. What was required was a continuing representation as to the state of the property, based on the earlier inspection, in circumstances where the vendor had been aware of the removal of the further items, such that making no comment about it to the purchaser amounted to deceit on ordinary principles. Knowledge of the removal of the items was a prerequisite of any obligation on the part of the vendor to correct its earlier representation based on inspection; the vendor was not required to disclose that which it did not know. Moreover, in the absence of fraud, which precluded reliance on clauses such as special condition 4, such clauses would ordinarily present an insuperable obstacle to the purchaser: Taylor distinguished. Likewise, a finding of fraud might preclude the defendant’s reliance on special conditions 13 and 16.
To require a fraudulent misrepresentation was not inconsistent with the exclusion from consideration of prior negotiations when construing a contract. The material background that could be taken into account might include what the parties knew. The making of a false representation might prevent the representor, on estoppel principles, from asserting that the facts known to the parties were other than he had represented; the facts so represented then became part of the relevant background: Chartbrook v Persimmon Homes Ltd [2009] UKHL 38; [2009] 1 AC 1101 and Investors Compensation Scheme Ltd v West Bromwich Building Society (No 1) [1998] 1 WLR 896 applied.
Even on the claimant’s version of events, he had been made aware that something had happened to a fireplace in the property. Although he had assumed that this was the fireplace that he already knew about, what he was told had raised the possibility that a different fireplace might have been damaged and, in turn, the question of whether more damage had occurred. Knowing that the defendant’s agent had not carried out a further inspection of the property, the reasonable purchaser would have carried out its own inspection and could not reasonably have taken the agent as saying that the property was the same as on an earlier inspection. In those circumstances, in the absence of a fraudulent misrepresentation, the expressions “the property” and “fixtures and fittings” in the sale contract should be read as meaning the property and its fixtures and fitting as they stood at the date of exchange.
(2) A further hearing was directed in order for the claimant to advance a case of fraud, founded on the allegation that the defendant’s agent, in the conversation with the claimant on the day of exchange, had known that a break-in had taken place resulting in further damage to the property, but had chosen not to mention this and had said as little as possible, knowing and intending, or at least being reckless in that regard, that the claimant would assume that the fireplace mentioned was a reference to the fireplace that the claimant already knew had been removed. If the agent had deliberately or recklessly misled the claimant by using guarded language that concealed as much as it revealed, that could arguably amount to fraud, and the fact that the claimant might have acted imprudently in not inspecting further would be irrelevant: Low v Bouverie [1891] 3 Ch 82 applied.
John Randall QC and Anthony Verduyn (instructed by Moore Brown & Dixon LLP) appeared for the claimant; Shail Patel (instructed by Brightstone Law LLP) appeared for the defendant.
Sally Dobson, barrister
