Sale of property – Auction – Misrepresentation – Appellant providing deposit cheque for land purchased at auction – Appellant subsequently cancelling cheque alleging that sale contract and chequer procured by misrepresentation – Respondent serving statutory demand for sum due – Appellant applying to set aside statutory demand – Whether appellant having grounds for misrepresentation claim – Appeal allowed
The appellant and his brothers (S and J) wanted to purchase land at auction that the respondent owned and that was described in the auction catalogue as 2.25 acres in extent with the benefit of planning permission (the auction land). J inspected the site on at least three occasions and the appellant also visited it and both had seen the catalogue. According to J, the site had been bulldozed and there were no clearly marked internal boundaries. However, two “For Sale” signs stood on the site. One remained from a previous sale and represented (unbeknown to the appellant and to J) part of the site that was not intended to be included in the auction land. The auctioneers had put the other sign on the auction land for the later sale. Each sign stated that the land being sold was 2.25 acres.
S attended the auction. Before the bidding started, the auctioneer read an addendum to the effect that this lot did not have a definitive site area and any reference to a site area of 2.25 acres should be ignored. Bidders were warned that if they had not seen the site and were unsure as to its actual extent, they should not bid for it.
Condition 9 of the special conditions of sale provided: “The buyer admits that she or it has inspected the property and that it has entered into this agreement solely on the basis of such inspection and the terms hereof and not in reliance upon any representations whether written or oral implied or made on behalf of the seller or its agent.”
S made a successful bid for the auction land at a price of £1.45m and paid the required deposit with a cheque for £150,000, which S handed to the appellant before the auction. The contract that S signed related to land with an acreage of around 0.8 acres. When the appellant realised that the auction land did not comprise the entire site, he cancelled the cheque.
The respondent served a statutory demand on the appellant, seeking payment of the sum due. The appellant applied to set aside the statutory demand on the basis that the contract had been rescinded, alleging that both the sale contract and the cheque had been procured by misrepresentation. In the alternative, the appellant contended that, since the cheque had been procured by misrepresentation, he had a counter-claim for misrepresentation equal to the amount of the cheque and that the demand should be set aside in accordance with r 6.5(4)(a) of the Insolvency Rules 1986.
The district judge dismissed the application on the ground that the claim for misrepresentation lacked reality. The appellant appealed.
Held: The appeal was allowed.
The combination of the auction catalogue, the site lay-out, the “For Sale” signs and what the auctioneers were alleged to have said before the addendum was read at the auction made it arguable that the respondent had been representing down to that point that the entire 2.25 acre site was being sold. Although the addendum might have negated the statement of acreage, it arguably did nothing to qualify or correct the representation that what was being sold was the entire site.
Although an auctioneer usually had no implied or ostensible authority to make representations, it was doubtful whether that principle could apply where the auctioneer was merely identifying the property that he was offering for sale since that was his job. Moreover, the general conditions of sale to which the auction was subject, advised purchasers to make all necessary enquiries concerning measurements and areas with the auctioneer’s firm. That made it at least strongly arguable that the auctioneer and his firm were expressly authorised to make such representations, if any, as might ultimately be proved.
Furthermore, because there was no satisfactory evidence before the court that the special conditions of sale had been incorporated into the sale contract, it was not appropriate for the court, on an application, to set aside a statutory demand to resolve the tension between the authorities as to the effect of condition 9 in the circumstances of the instant case: Cremdean Properties Ltd v Nash [1977] 1 EGLR 60; (1977) 241 EG 837, EA Grimstead & Sons Ltd v McGarrigan unreported 27 October 1999, Watford Electronics Ltd v Sanderson CFL Ltd [2001] EWCA Civ 317; [2001] 1 All ER (Comm) 696, Peekay Intermark Ltd v Australia & New Zealand Banking Group Ltd [2006] EWCA Civ 386; [2006] 2 Lloyd’s Rep 511, IFE Fund SA v Goldman Sachs International [2006] EWHC 2887 (Comm); [2007] 1 Lloyd’s Rep 234, and JP Morgan Chase Bank (formerly Chase Manhattan Bank) v Springwell Navigation Corporation [2008] EWHC 1186 (Comm) considered.
It followed that there was a seriously arguable case that the sale contract and accompanying cheque were induced by misrepresentation that could be resolved only at trial. Accordingly, the statutory demand should be set aside.
Avtar Khangure QC (instructed by Clarke Willmott, of Birmingham) appeared for the appellant; Geraint Jones QC (instructed by Fuglers) appeared for the respondent.
Eileen O’Grady, barrister
