Allyson Colby evaluates a local authority’s failure to reveal that land being sold included part of the highway
Key points
- The High Court has upheld a claim by a developer in respect of an inaccurate reply to a local search
- The damages awarded reflected the diminution in the value of the property, but not lost development profits
Buyers commonly raise enquiries in local searches to establish which roads are adopted. Some may also want to ascertain whether there are any ransom strips that separate land from the highway. Conversely, it may also be important for the buyer to know whether any of the land for sale forms part of the public highway, since this would restrict its use and prevent the buyer from developing it.
Reported cases concerning inaccurate information provided by local authorities are relatively few and far between. Consequently, the property world sat up and took notice of the decision in Gooden v Northamptonshire County Council [2001] EWCA Civ 1744; [2002] 1 EGLR 137, which concerned the discovery of a ransom strip that interfered with the development of a block of flats. The buyer claimed damages from the local authority for mis-stating the position in response to enquiries about the extent of the highway, but the court rejected the claim on the ground that the local authority had not been told that the buyer intended to develop the property and, as a result, could not be fixed with liability for lost development profits.
Local search
The recent litigation in Chesterton Commercial (Oxon) Ltd v Oxfordshire County Council [2015] EWHC 2020 (Ch); [2015] PLSCS 228 sheds further light on this area of the law. The case concerned a family-run property development company that acquired three properties in Henley-on-Thames for £1,245,000. The registered title included land in front of the properties that was used for parking and the results of the company’s local search indicated that it did not form part of the public highway.
This was important to the company because there was a shortage of car parking in the town and the inclusion of the parking spaces was material to the price paid. The company planned to sell the properties with private parking and to sell the remaining spaces on the open market. However, it did not make this known to the council and there was no reason to suppose that the council should have foreseen its intentions.
U-turn
Unfortunately, the search results were incorrect. There had once been a turnpike road which ran along the frontage of the properties and, although the road had been diverted in the early 1800s, the old highway had never been legally stopped up. Consequently, the land in question still formed part of the public highway.
It emerged that the status of the land had been under investigation for some time and that the council had known that its records might be inaccurate. Indeed, there was very strong evidence that the frontage might form part of the public highway, but the council did not disclose this in its reply to the company’s local search.
The subsequent conclusion that the frontage was, and always had been, part of the highway put paid to the company’s plans to sell the parking spaces. Consequently, the company claimed damages from the council for breach of statutory duty and in tort for negligent mis-statement.
Council’s duties
Section 36(6) of the Highways Act 1980 places councils under an obligation to keep a “corrected up to date” list of the streets within their area that are maintainable at public expense. Was the local authority liable for breach of statutory duty because the results of the local search were incorrect? The question of whether a local authority can be liable to a member of the public in a private action for breach of statutory duty for an inaccurate search result was undecided – and still is, because the judge upheld the company’s claim in tort and did not need to consider this.
It has long been established that local authorities can be liable to members of the public in tort and Gooden is authority for the proposition that a local authority owes a duty of care to buyers when answering enquiries about whether land forms part of the public highway. Furthermore, it was foreseeable that, if the result of the search was wrong, the buyer might go ahead at a price that was higher than if an accurate response had been given.
The council tried to persuade the judge that the results of the local search accurately reflected the position as shown on the highway map at the time. However, the judge ruled that, if the council’s records had been correct and up to date, they would have revealed the investigation. Therefore, the council had been negligent when it stated unequivocally that the frontage was not part of the highway, instead of saying that its status was being investigated, and the council was liable for negligent mis-statement.
Damages
The judge accepted that the company did not tell the council that it was buying the land for development and resale. However, this was irrelevant because the company was claiming damages for diminution in value in respect of an existing use, as opposed to lost development profits. The judge assessed the difference in the value of the land with and without parking at £240,000, and also awarded damages to cover the cost that the company had incurred in funding the overpayment, as well as in respect of an unsuccessful attempt to obtain a stopping up order.
Buyers will welcome the decision on the scope of the duty of care when responding to highway enquiries and will be reassured by the court’s willingness to award damages for inaccurate search results in appropriate cases.
Allyson Colby is a property law consultant
