Vendor and purchaser — Whether false (but not fraudulent) misrepresentation was made by vendor of flat — Whether, if so, purchasers bought the flat in reliance on the misrepresentation — Whether vendor believed on reasonable grounds that facts represented were true — Claims by purchasers relying on section 2(1) of Misrepresentation Act 1967 and on negligence at common law — Effect of disclaimer of liability — Both the purchasers and the vendor in this case were described by the judge as decent and honest but also young, inexperienced and ignorant — The plaintiff purchasers, in addition, were ‘touched by a degree of naivety’ — The purchasers had obtained a limited survey which found signs of dampness and slight wet rot — The report advised that the firm which had previously carried out damp-proof treatment should be recalled if a guarantee still existed; if not, a specialist firm should be called in to inspect and prescribe treatment — In the end, for various reasons, this course was not pursued before completion — In answer to an additional inquiry before contract as to whether, to the vendor’s knowledge, the property had been subject to woodworm, rising damp, dry or other rot or infestation, the vendor answered ‘No’ — This answer was subsequently to be
The following
cases are referred to in this report.
Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158; [1969] 2 WLR 673;
[1969] 2 All ER 119, CA
Ford v White & Co [1964] 1 WLR 885; [1964] 2 All ER 755;
[1964] EGD 283; 190 EG 595
Hedley
Byrne & Co Ltd v Heller & Partners Ltd
[1964] AC 465; [1963] 3 WLR 101; [1963] 2 All ER 575; [1963] 1 Lloyd’s Rep 485,
HL
Parry v Cleaver [1970] AC 1; [1969] 2 WLR 821; [1969] 1 All ER
555; [1969] 1 Lloyd’s Rep 183, HL
Perry v Sidney Phillips & Son [1982] 1 WLR 1297; [1982] 3 All
ER 705; [1982] EGD 412; (1982) 263 EG 888, CA
Philips v Ward [1956] 1 WLR 471; [1956] 1 All ER 874, CA
Redpath v Belfast & County Down Railway [1947] NI 167
Saunders v Edwards [1987] 1 WLR 1116; [1987] 2 All ER 651, CA
Treml v Ernest W Gibson & Partners [1984] EGD 922; (1984) 272
EG 68
Walker v Boyle [1982] 1 WLR 495; [1982] 1 All ER 634; (1981) 44 P
& CR 20; [1982] EGD 1149; 261 EG 1090
This was an
action by the plaintiff purchasers, Colin Lester Cooper and Karen Margaret
Cooper, against the defendant vendor, Shirley Anne Tamms, complaining that they
had bought a ground-floor flat at 2 Strathville Road, Southfields, London SW
18, in reliance on a false representation by the defendant as to the condition
of the flat.
Alan Bishop
(instructed by Evill & Coleman) appeared on behalf of the plaintiffs; Miss
Alison Hampton (instructed by Crane & Walton, of Leicester) represented the
defendant.
Giving
judgment, Mr P J CRAWFORD QC said: This action concerns a contract made in 1983
in relation to the sale and purchase of the ground-floor flat at 2 Strathville
Road, Southfields, London SW 18. The seller of the flat was the defendant, then
Miss Shirley Anne Siggins, now Mrs Tamms. The purchasers were the plaintiffs,
Mr Colin Lester Cooper and his then fiancee Karen Margaret Doyle, now Mrs
Cooper.
All three of
the parties to this action, as I find, were decent, honourable and honest
people. They were also, all of them, young, inexperienced and ignorant. It was
the first time that the plaintiffs had ever bought any property and the first
time that the defendant had ever sold any. In addition to their inexperience
and ignorance, the plaintiffs were touched by a degree of naivety. They were
also, however, in my judgment, let down by their professional advisers and led
into litigation which careful, competent and conscientious advice at the proper
time would have spared them.
The short
issue in the case is whether the plaintiffs bought the house in reliance upon a
false representation by the defendant vendor that it had not been affected by
woodworm, rising damp, dry or other rot or infestation, those being matters
referred to in the additional inquiries before contract which had been
submitted by the plaintiffs’ solicitors to the defendant’s solicitor as the
transaction proceeded.
From the
plaintiffs’ point of view, the facts were these. On October 1 1983 they were
house-hunting in the Southfields area and came across agents who had this house
on their books. They went to see the premises and liked them and made an offer
to purchase that same day at the asking price of £27,250. I should say that
they were escorted to and shown round the premises by the agents, the defendant
at that time having recently married and being away on her honeymoon.
The plaintiffs
had no experience of property or conveyancing matters. They knew no solicitors.
They had made no preparations for paying the purchase price, apart from having
some savings in the Woolwich Equitable Building Society. The following Monday,
October 3, they got in touch with the building society and set arrangements in
train for a mortgage. Knowing of no solicitors, they were provided with a list
by the building society and selected (as I understand it, more or less at
random from that list) solicitors who they then instructed as being near at
hand. They were also provided by the building society with a list of surveyors
locally. The plaintiffs telephoned round the surveyors with a view to getting
some kind of survey on the premises.
Mrs Cooper
told me that she fixed on a local firm, Frank R Marchant, as being the most
economical. She, having telephoned a number of firms, gave that firm
instructions. It is possible that that firm was the most economical because
they were the same firm of surveyors as had been instructed by the Woolwich
Building Society. By a memorandum of October 7 1983 the building society
instructed the surveyors, Marchants, to inspect and report on the property.
It is to be
observed that there is a typewritten note on the common form memorandum saying:
‘Applicants require structural survey.’
In fact they never had a structural survey. It seems to me unlikely that
they knew of the difference between one kind of survey and another. The survey
that was in fact carried out by Marchants was the Royal Institution of
Chartered Surveyors’ ‘Flat Buyers Report and Valuation’, which is substantially
less thorough, and no doubt also substantially cheaper, than a structural
survey.
On October 14
1983, Mr Geoffrey Marchant of that firm inspected the premises and produced the
report which is document 18 in the bundle which is before the court. By that
time the plaintiffs had instructed their solicitors, Evill & Coleman. They
did so by telephone. They did not meet their solicitors until a much later
stage when the transaction had already started to go wrong. In the course of
the routine processing of the conveyancing, Evill & Coleman, by a letter
dated October 10 1983 sent to the defendant’s solicitors, Crane & Walton,
of Leicester, a form of preliminary inquiries. The preliminary inquiries were
mostly in common form, but they incorporated certain additional inquiries to
which I will return.
The surveyor’s
report is dated October 17 1983 and must have been in the possession of the
plaintiffs by October 19 1983, that being the date of a letter from the
vendor’s agents, H V Bragg & Co, to the plaintiffs referring to a reduction
in the purchase price of the premises of £500 which was agreed, as I find,
after and in consequence of the surveyor’s report.
The surveyor’s
report does not purport to be a full structural survey. It was, and was
expressed to be, limited. On p 1 there is this warning note:
The
inspection is to provide a report on the general state of repair of the flat
described below. It is not a structural survey but a report by a Chartered
Surveyor on those matters expressly set out in this report together with
valuation advice. The information set out below must be read in conjunction
with the marginal notes.
It also says:
Your
attention is drawn particularly to clauses 4, 5, 6, 7, 8, 9 and 10 which define
the scope and limit of the report.
It is
noteworthy that by condition 4 it is provided that:
The surveyor
will inspect as much of the surface area as is practicable from ground level
externally and internally, will lift loose floorboards and trap
floorboards which, in any event, are frequently covered with hardboard, or to
inspect those areas of the flat that are covered, unexposed or inaccessible.
By condition 7
it is provided that:
Except where
the contrary is stated, the parts of the structure and of the woodwork which
are covered, unexposed or inaccessible will not be inspected and will be
assumed to be sound and in good repair.
In the body of
the report it appears that the premises are subject to problems regarding damp.
On p 2 there appears this comment against the side heading ‘Damp-proof course
and sub-floor ventilation’:
Following
breakdown of original DPC we understand that a chemical damp-proof course was
inserted through most external walls by a specialist firm and extra air bricks
were fitted all under guarantee. However, the treatment does not appear to have
been effective and further remedial work is required. See 17.
Para 17
appears on p 4 where these two relevant paras are set out. At para 17:
There are
signs that chemical treatment has been carried out to most of the external
walls but on taking readings with a Protimeter moisture meter positive results
were obtained in all rooms except the bathroom. Should a guarantee be in existence,
the firm which carried out the work should be instructed to re-inspect with a
view to undertaking additional treatment which is likely to include the hacking
off of damp plaster affected by hygrascopic salts.
Against para
21, where the side note reads:
Woodworm, dry
rot and other timber defects within the flat as revealed by the examination of
the structure but excluding those areas of the building which are covered,
unexposed or not readily accessible . . .
there is this:
We detected
slight wet rot in the flooring to the covered entrance lobby and old standing
woodworm infection in some floors and to the stair cupboard panelling. It is
possible that treatment may have been carried out in the past and guaranteed,
in which event the company which undertook the work should be recalled to
ascertain whether any further treatment is required. In any event, the rotted
flooring in the communal lobby should be renewed and, if no guarantee is
forthcoming, a specialist firm should inspect the property with a view to
preparing a report covering treatment of woodworm and wet rot.
The report
concludes by stating:
We consider
the current value of the property in its present condition to be £26,750, that
is to say £500 less than the asking price and there would appear to be a fairly
good demand.
It is
noteworthy from the passages that I have read out that Mr Marchant, the
surveyor who prepared the report, advised on p 4, first:
Should a
guarantee be in existence, the firm which carried out the work should be
instructed to re-inspect.
Second
if no
guarantee is forthcoming a specialist firm should inspect the property with a
view to preparing a report covering treatment of woodworm and wet rot.
When he gave
evidence, Mr Marchant told me that he very quickly detected the presence of
damp in the walls of the premises, with his Protimeter, saw that there had been
some remedial work carried out at some date in the past, that it was obvious
that that work was not effective and that, accordingly, he very soon formed the
view that he would advise a specialist firm to be called in to inspect, which
indeed he did, in his report. Having taken that view, he himself paid less
attention to damp. In particular, he made no attempt to get at the underfloor
area of the house and, if his report is read carefully, he makes it plain that
that is so.
The report, in
my judgment, is limited in its scope because so much of the premises which is
relevant was not in fact inspected.
The plaintiffs
received the report and read it, no doubt, with care and noticed that there was
a reference to wet rot in the covered entrance lobby and the reference to a
guarantee. Miss Doyle (as she then was) telephoned her solicitor. By the
attendance note of the solicitor’s representative, Mrs Lawrence, dated October
21 1983, Mrs Lawrence noted:
Miss Doyle
rang me when she said that she had heard from the building society that the
property had been over-valued and there were some queries regarding the damp-proofing
guarantees and there was some dry rot. She said that, as a result, the price
had been reduced by £500. I said that when I received instructions from the
building society, I would deal with the necessary guarantees. I said I was
still waiting for replies to Enquiries which might show these.
One small
point which arises on that attendance note is the reference by Mrs Lawrence to
dry rot. There is no reference to dry rot in the surveyor’s report. Mrs
Lawrence told me that what Miss Doyle must have told her was that there was
some wet rot and that she should have put ‘wet rot’ in, but that when the
original of the attendance note was being dictated she must have used the
expression ‘dry rot’ by mistake.
On
consideration, I have come to the conclusion that I can accept Mrs Lawrence’s
evidence in that respect and I do accept it. There was no reason why dry rot
should have been mentioned in relation to those premises at that stage. Though
I do observe in passing that it displays, to my judgment, a somewhat
lackadaisical approach to conveyancing when the words ‘dry rot’ are written
instead of ‘wet rot’, and the implications of the one as against the other
appear not to have been considered.
But the fact
of the matter is that, accepting Mrs Lawrence’s evidence, it was well known to
the plaintiffs by that date, October 21, that there was rot in the premises and
that there were queries regarding the damp-proofing guarantees.
What the
plaintiffs told me was that they, having read the report, noticed that the references
to wet rot were limited to the flooring in the covered entrance lobby, which
was a communal entrance lobby outside the area of the demise, and, accordingly,
felt that that was a matter to be dealt with in conjunction with the occupier
of the upper flat in the same premises and did not represent a particular
problem to themselves.
So far as the
guarantee was concerned, they understood (though from what source at that stage
is not clear) that there was a guarantee given by the firm which had carried
out the work to the damp-proof course which covered the other signs of damp
which had been found by the surveyor. In that, as it turns out, they were
mistaken. The damp-proof course had been installed by specialist contractors,
namely the South London Timber Preservation Co Ltd, a number of years before. A
guarantee had been given in relation to that work, as it usually is for that
class of work, but the extent of the work was very limited. In particular, that
company had not been called upon to carry out any work to the wooden flooring
of the premises and, as it turned out, it was the wooden flooring that was
substantially the root of the trouble.
Now, the
position at or about October 21 was that the plaintiffs had received Mr
Marchant’s report in which he recommended that the premises be inspected,
either under the guarantee (if there was one) or (if there was not) with a view
to preparing a report covering the treatment of woodworm and dry rot. In fact,
as it turned out, there was no effective guarantee of the premises such as to
cover woodworm and dry rot.
Having had the
surveyor’s report, the plaintiffs returned to the Woolwich Equitable Building
Society; and the society, having then received their own report from the same
valuer — a much more abbreviated document — offered an advance by letter of
October 24.
The next
stage, from the purchasers’ point of view, was their receipt of a letter from
their solicitor dated October 25 1983, which records that the purchase price of
the property had been reduced by £500 and also incorporating this paragraph:
I also enclose
copies of the following for your information.
1 Search in the London Borough of Wandsworth.
2 Enquiries with the vendor’s replies and copy
documents referred to.
3 Lease.
4 Office Copy entries.
The copy
documents referred to in subpara 2 included the guarantee which had previously
been given in respect of these premises by the South London Timber Preservation
Co Ltd, dated August 18 1980, and appears in the papers at document 2.
Unfortunately,
the guarantee by itself is meaningless. It recites that:
Pursuant to
the terms of the above mentioned contract this warranty is issued by the South
London Timber Preservation Company Limited in respect of the work carried out
at the above property by the company’s operatives.
The
‘above-mentioned contract’ is identified by number and date and the words
‘chemical DPC’. The guarantee is valueless as a document because the works
guaranteed are not more particularly described. In other words, it tells the
reader nothing without knowing more about the contract which is identified. If
it were accompanied by the report and estimate identified, then no doubt it
would be
been carried out which is the subject of the guarantee.
Now, with the
copy documents were the vendor’s replies to the inquiries before contract, and
it is on these that the plaintiffs rely. The inquiries before contract were in
common form. They were then followed by a series of additional inquiries which
are special to the plaintiffs’ solicitors, containing a great many inquiries of
more or less relevance to this class of transaction.
One question
(and its subquestions) only is relevant. It is question no 20 and reads as follows:
Has the
property been subject to any of the following to the vendor’s knowledge?
1 Flooding.
2 Structural building or drainage defects.
3 Subsidence or heave.
4 Dampness.
5 Woodworm, rising damp, dry or other rot or
infestation.
If so, please
supply full details thereof including any treatment or remedial works carried
out.
The answer to
those questions are as follows:
1 Flooding — no.
2 Structural building or drainage defects — no.
3 Subsidence or heave — no.
4 Dampness — yes.
5 Woodworm, rising damp, dry or other rot or
infestation — no.
Then, in
answer to the request to supply full details thereof, there appears this note:
DPC fitted
1980. When I purchased the property £500 retention put on mortgage in case
further work necessary. Premises needed to dry out. Subsequent survey carried
out by Rentokil and building society surveyor and cleared of damp. £500
retention lifted by building society.
The replies
therefore indicated ‘Yes’ as the answer to dampness but ‘No’ as the answer to
rising damp, dry or other rot.
The
plaintiffs’ case is that they relied on those representations in proceeding
with the contract. I have no doubt that the plaintiffs did in fact read those
answers as they read all the documentation relating to this transaction. They
did not receive any help in relation to those answers from their solicitor, who
merely sent them the documents under cover of the letter which I have
mentioned.
It is to be
observed at this stage that the plaintiffs were aware that the property
suffered problems in relation to damp. They were aware or must be taken to be
aware that the premises had only partially been inspected. And they knew that
their surveyor had advised that there should be an inspection by a specialist
firm. This is illustrated by the attendance note from the plaintiffs’
solicitors’ clerk, Mrs Lawrence, of October 31 1983, where she said:
Attending Mr
Cooper
attending,
that is, by telephone
when he said
that he had now received his mortgage offer and this was subject to the
damp-proofing guarantee being in existence. I said that the property had the
benefit of a guarantee and Mr Cooper said that both the building society’s
surveyor and his own had reported that this was not working.
Interposing,
there seems to be some elision there. What was not working was not the
guarantee but the work which was supposed to have been guaranteed, namely the
damp-proof course. Resuming to what Mrs Lawrence says:
I said that
in that event he must go back to Miss Siggins
the vendor
and arrange
for the South London Timber Preservation Company Limited to re-inspect and
report on why the treatment was not working, although I said that he should be
quite prepared for them to say that this was because the replastering had not
been done properly and it might be better if he obtained a report and estimate
from another company and renegotiated the price with Miss Siggins. Mr Cooper
said that he had to give one month’s notice where he was living and asked when
he should do this. I said that if everything was in order with the
damp-proofing treatment, then he could exchange contracts immediately and
complete on December 1.
The following
day, November 1, the plaintiffs’ solicitors wrote to the defendant’s solicitors
saying this:
The mortgage
offer is subject to the damp-proof guarantee being assigned to our clients on
completion. The mortgagee’s surveyor also reports that the treatment by the
South London Timber Preservation Company does not appear to be working and the
property should be re-inspected and the company called in to carry out any
further treatment necessary. Our clients say that their own surveyor also
reported that the damp-proof course did not appear to be working.
There appears
to be some confusion in the mind of Mrs Lawrence who wrote that letter because,
of course, the building society’s surveyor and her clients’ own surveyor were,
of course, the same person. Continuing:
We shall be
glad if you will ask your client to arrange for the property to be re-inspected
in accordance with the guarantee. Would you also please let us have a copy of
the report and estimate to produce to the mortgagees?
Now, that
letter was written, it is quite plain, without a full consideration of the
surveyor’s report of his inspection on October 14, a fortnight before. Indeed,
Mrs Lawrence told me that she had never seen the surveyor’s report at that
stage or at any stage until after this matter had been completed. It seems to
me a great pity that she did not see it, because it contained several warning
signs to the experienced eye. Further, the letter was written under a
misapprehension because the report said that if there was a specialist
guarantee, then the specialists should be recalled, and if there was not, then
a specialist should be called in to prepare a report.
What happened
here was that a form of guarantee had been forwarded but nobody took the
trouble to find out how much the guarantee actually covered, which in fact was
not very much.
The letter to
which I have just referred met with this reply from the vendor’s solicitors,
dated November 4 1983:
We note what
you say concerning the assignment of the guarantees which you have seen and our
client has no objection to this. However, the price of the property has been
reduced by £500 to allow some expenditure on your clients’ part to perhaps
remedy the situation and our client is not prepared to proceed with the South
London Timber Preservation Company as you suggest. You must take whatever
action your clients think appropriate following completion. Would you please
let us know by return whether your client wishes to proceed?
The substance
of that letter was passed on by the plaintiffs’ solicitors to their clients by
letter dated November 10:
With regard
to the assignment of the existing damp-proofing agreement, this will be done
but the price of the property has been reduced by £500 to allow for the purpose
of allowing you to carry out necessary repairs to the property, and the vendor
is not prepared to proceed any further with the South London Timber
Preservation Company. You must therefore take whatever appropriate steps are
required to put the matter right after completion. The Building Society have
agreed that necessary repairs can be carried
evidently
‘out’ is omitted
within a
period of 3 months on your undertaking.
which is a
rather less than clear way of putting the position.
Now that
letter was an invitation to the solicitors’ own clients to complete without
having inspection. It is simply a quotation from the vendor’s solicitors’
letter — ‘You must therefore take whatever appropriate steps are required to
put the matter right after completion’. In my judgment, that was fundamentally
unsound advice. The matter should have been put right before completion;
indeed, before exchange. Unhappily, that was not done.
Now, the
position at this stage was that the plaintiffs were in possession of a
surveyor’s inspection report recommending in a perfectly explicit way
inspection of the premises by a specialist and saying why, namely previous
damp-proofing work was not effective and there were signs of wet rot
immediateley adjacent to the demise and on the same floor, and making it plain
that the subfloor area had not been inspected.
The plaintiffs
knew that the premises were damp and knew that their surveyor had advised an
inspection. They also had the replies to the inquiries which said, inter
alia, that there had been a damp problem in the premises and which also
said that there was no rising damp, dry or other rot.
The plaintiffs
then made some attempt to get South London Timber Preservation Co — the company
which had issued the guarantee — to come back to the premises and inspect. No
inspection took place within the week following the letter of November 10 to
which I have just referred. The solicitors appear to have been content to allow
their clients to organise this on their own.
The
conveyancing side of the matter proceeded as if everything was in order,
although plainly, in my judgment, it was not. Contracts were exchanged on
November 16 with a view to completion on December 1. During the fortnight
between contract and completion, it appears that there was some contact between
the plaintiffs and South London Timber Preservation Co with a view to their
going into the premises and inspecting. In fact they did not. An issue in this
case
omission.
Throughout
this period (that is to say during the whole period from October 1, when the
plaintiffs first saw the flat, to completion) the defendant, the vendor, was
not living there. She had in fact got married on September 16 1983, had gone
away on honeymoon immediately thereafter and was, therefore, for that reason,
away when the plaintiffs first saw the house on October 1. She returned
sometime after October 1 and went to live with her husband in his flat, which
he had had before marriage, not far away. The defendant had left her furniture
and various clothing and personal possessions in the flat but was not living
there. The keys, she told me, had been left with the agents in order to sell
the premises before she went on honeymoon and were there all the time.
Mrs Cooper
told me that from about November 8 onwards she tried to have the premises
inspected by South London Timber Co and, in order to do that, they had to get
access. She telephoned Mrs Tamms, the defendant, saying that they had to get
the guarantees checked out. She told me that Mrs Tamms was very pleasant on the
telephone and agreed to that, and that a number of arrangements were made for
South London Timber Preservation Co to inspect the premises but that Mrs Tamms
changed the arrangements so that the inspection could not take place as
arranged. What Mrs Cooper told me was that a day or so before the timber
company was going in to inspect she received a telephone call from Mrs Tamms
saying that she was unable to be there on the date and time and they should
have to make other arrangements. It happened more than once and the days went
by; exchange took place and then completion took place, and it was not until
after completion, when the plaintiffs were in occupation, that the inspection
took place.
Mrs Tamms,
when she gave evidence, told me that she was perfectly happy that there should
be an inspection but she was working and had no intention of being present
there herself. The keys were with the agents, Bragg & Co, and the
plaintiffs could have had access with the assistance of the agents at any time.
She tells me she remembers Mrs Cooper telephoning twice or maybe three times;
that she had no intention of keeping them out of the property and she herself
did not intend to be there when it was inspected.
Now, the only
finding which it is necessary for me to make on these facts is whether Mrs
Tamms was deliberately playing out time or making difficulties so as to
obstruct an inspection until after completion. I am satisfied that that is not
so. There may have been misunderstandings between Mrs Tamms and Mrs Cooper at
that time. It may have been that the difficulties occurred through the South
London Timber Co, and I bear in mind that Mrs Tamms told me when she gave
evidence that when she tried to get South London Timber Co to inspect on one
occasion, they said that it would take about five or six weeks before they
could do it.
I am satisfied
that the fact that there was no inspection before completion is not
attributable to any act or default on the part of Mrs Tamms. It is, I may add,
a great pity, in my judgment, that Mrs Cooper did not tell her solicitors that
inspection had not taken place (for whatever reason and whoever’s fault, or
whether nobody was at fault), and her solicitors ought then to have refused to
complete until the inspection had taken place. But that was never done.
Possibly, having regard to the letter of November 10 1983 which referred to
appropriate steps being taken to put the matter right after completion, it did
not seem necessary to the plaintiffs that they should do that.
After
completion, South London Timber Preservation Co did carry out their inspection
— on December 15 1983. It turns out that the condition of the ground-floor
flooring was very poor and a good deal of work was required. There was
extensive wet rot and there was a relatively small area in the underfloor of
dry rot which at that stage had not invaded any of the timbers.
The
plaintiffs’ claim is that they entered into that contract in reliance on the
representation contained in the answers to the preliminary inquiries. The
answer to question 20, subquestion 5, of the preliminary inquiries was a
representation of fact limited by reference to the vendor’s knowledge and it
was not true. In fact it was wrong. In order to succeed, the plaintiffs have to
satisfy me that they were materially influenced by that representation.
I have to say
that the plaintiffs have failed to satisfy me that they were materially
influenced by that representation. In my judgment, they relied upon the
surveyor’s report and the advice which they were given from their solicitors.
The surveyor’s report made it perfectly plain that there were problems with
dampness which had to be investigated, and they should certainly have been
investigated before this transaction went any further, and they never were.
I do not
think, having heard the evidence of Mr Cooper and Mrs Cooper that the reply to
question 20(5) would have made any difference. It would have been taken as
simply another illustration of the problem of dampness, which was or should
have been under investigation. I am fortified in this by noting that the answer
‘Yes’ to question 4 and ‘No’ to question 5 is, on the face of it, inconsistent,
and yet the inconsistency was not picked up by the plaintiffs. They did not ask
their solicitors, nor did their solicitors ask of their own volition, for any
further information. They knew that the premises, being damp, required work
done to put it right. They hoped — indeed, they assumed — that it could be put
right under guarantee, but they were not entitled to make that assumption on what
they were told. The guarantee did not explain, on its face, what it covered.
The report from their surveyor left open whether there was a valid guarantee in
existence or not. The report from their surveyor made it plain that if there
was not an effective guarantee, then the premises should be inspected by
specialists.
But the
purchasers blithely went ahead. They did not find out the precise scope of the
guarantee by obtaining from the South London Timber Co the contract details of
the contract to which it related. If they had done that, they would have found
that the guarantee was of very limited scope, even if it were fully effective.
And they did not have the premises inspected. When I say ‘the purchasers’, I do
not mean to refer to the purchasers individually alone, I refer to the
purchasers and their solicitors collectively.
In this case I
am satisfied that, as Mrs Cooper told me in examination-in-chief: ‘We assumed
that as we had a guarantee for the damp-proof course, everything was all right.
There was no real discussion between us’ — that is to say, between herself and
her husband. ‘We assumed that everything was covered. We just assumed that we
could get the company back which had done the work and it would be all okay.’ In fact the guarantee was of very loose scope
and turned out to be useless.
Having come to
the conclusion they were protected by the guarantee, that may be an explanation
why they did not pursue more actively the inspection. But the emphasis which
they seek now to put on the replies to the inquiries before contract, in my
judgment, is made with the wisdom of hindsight. Those answers raised certainly
a question concerning dampness which was not pursued. A surveyor’s report
raised questions which were not pursued. Their surveyor gave advice which was
not followed.
In saying
this, as I do, I want to make it clear that I am not criticising the plaintiffs
individually or personally, and I do not find that they acted unreasonably. I
think that they should have been taken care of in a way in which they were not
taken care of.
It follows
from the conclusion to which I have come that, in my judgment, the plaintiffs’
claim fails. But in view of the evidence and argument which I have heard over
five days raising other matters, I ought to indicate my findings on those as
well.
The
plaintiffs’ claim is put under section 2(1) of the Misrepresentation Act 1967
(as amended), and also negligence at common law. By section 2(1) of the Act:
Where a
person has entered into a contract after a misrepresentation has been made to
him by another party thereto and as a result thereof he has suffered loss,
then, if the person making the misrepresentation would be liable to damages in
respect thereof had the misrepresentation been made fraudulently, that person
shall be so liable notwithstanding that the misrepresentation was not made
fraudulently, unless he proves that he had reasonable ground to believe and did
believe up to the time that the contract was made that the facts represented
were true.
Now, the
primary defence raised by the defendant was that there was no reliance on the
representation. In my judgment, as I have indicated, that defence succeeds. If
it had failed, the defendant would have a second limb under the proviso that
concludes subsection (1) — the defendant to prove that she ‘had reasonable
ground to believe and did believe up to the time the contract was made that the
facts represented were true’. I must turn to and deal with that.
From the
defendant’s point of view, the position is that she bought the flat in 1981
from developers who had carried out the conversion work. There was dampness in
the premises when she bought them. Because of the dampness her mortgagee had
insisted on a retention of £500. The defendant knew that some damp-proofing
work had been
the South London Timber Co to return and inspect the premises with a view to
clearing them. She was surprised and disturbed to find that they made a charge
of £20 plus VAT for that service, which she thought was unreasonable having
regard to the fact that they were being asked to check and verify their own
work.
Accordingly,
she called in Rentokil (another well-known firm in that field) to give her a
free report, which they did. The document containing the report, unhappily, has
been lost and apparently cannot now be traced either through the defendant’s
solicitors or her then mortgagees. The defendant tells me, and I accept, that
the report from Rentokil cleared the premises of damp; that she sent the report
to her mortgagees, who then lifted the retention and advanced the £500 which
had been retained. I accept the defendant’s secondary evidence in relation to
the contents of that report.
When the
defendant put the flat on the market some time before the plaintiffs saw it,
she had a potential purchaser who was interested. The purchaser instructed a
surveyor. After the survey, the purchaser withdrew. In the light of that, the
defendant sought to get the South London Timber Preservation Co back to
reinspect the premises. Again, to her annoyance and irritation, she was told
that there would be a charge. And she was also told that it would take five or
six weeks for them to attend.
Accordingly, the
following day she telephoned them again in the guise of a prospective customer
and asked them to come and conduct a survey. That had the desired effect
because a surveyor, Mr McDonald, came from the South London Timber Preservation
Co within a couple of days. This, no doubt, did nothing to improve the standing
of the company in her eyes, since the request to come and inspect work of their
own was met by the response that it would take five or six weeks but a
telephone call inviting them to come to a potential new customer resulted in a
call in two days.
Mr McDonald, a
director of the company, came in response to her call. He went to the cupboard
under the stairs and by cutting and lifting some boards in that cupboard
obtained access to the underfloor area. There was a minor issue in this case as
to whether Mr McDonald had cut the boards himself or had made use of some
pre-existing door. I am quite satisfied that he cut the boards himself, in so
far as they needed cutting. When he emerged from the underfloor area, he told
the defendant the whole floor needed replacing and all sorts of things were
wrong with the place.
Mr McDonald
gave evidence to the same effect. He said that he inspected the underfloor
area, saw substantial areas of wet rot and one area of dry rot about one and a
half m2.
Mrs Tamms was
surprised at this news, having regard to the fact she had, two years earlier,
managed to get her own retention released, and was somewhat sceptical about its
accuracy, taking the view (mistakenly, as it turned out) that Mr McDonald was
simply trying to sell the services of his company and was overestimating the
amount of work that required to be done.
If Mrs Tamms
had left the matter there, she would, I think, have been open to criticism. But
she did not leave it there. What she did was to call in a surveyor friend of
her husband’s, a Mr Rolls-King, to give her what she could rely on as an
unbiased opinion. Mr Rolls-King came to the premises at her request shortly
afterwards and he inspected the underfloor area some time in the week before
the defendant’s wedding. Mr Rolls-King told me that he spent 50 minutes or
thereabouts under the floor making a detailed inspection.
Mr Rolls-King
told me that he was 42 years of age, he had worked for 23 years in the field as
a building surveyor, having been employed by well-known chartered surveyors,
and had been for the last 10 years in practice as a consultant surveyor,
although he had no formal qualifications. I have, of course, given careful
consideration as to the weight which I should place on Mr Rolls-King’s
evidence, having regard to his unqualified status. But I think I should say
that I found him an impressive and accurate witness. In my judgment, he was
careful in what he said to the court, and I have no doubt that he was careful
in what he said to Mrs Tamms, and I have no doubt that he made a careful
inspection. It is to be noted that his inspection lasted for 50 minutes whereas
Mr McDonald’s lasted for 15 minutes only, or thereabouts. I say that not by way
of criticism of Mr McDonald, because it may be that Mr McDonald was enabled to
be perfectly satisfied on a quarter of an hour’s inspection. I mention it only
as an illustration of the thoroughness of Mr Rolls-King.
Mr Rolls-King
told me that he, too, had seen the mycelium dry rot growth in the underfloor
area of this house. He did not dissent from Mr McDonald’s estimate that it was
about one and a half m2 in extent. He also said that he found
extensive wet rot; again agreeing with Mr McDonald that the dry rot at that
stage was not invasive.
Having made
his inspection, he emerged and spoke to Mrs Tamms. He told me that he told her
on that occasion that she had damp-related problems in her floorboards. He told
her that there was a problem; that, in his opinion (contrary to what had been
said by Mr McDonald of the South London Timber Preservation Co), it was not
necessary to replace the floors and the cost of the work would be about £500 to
£600.
He told me
that Mrs Tamms had asked him whether she should do the work herself or whether
she should apply a reduction in the sale price of the house. His reply was that
the best way was to reduce the price by an amount and let the purchasers get on
with the work. He told me that he did not give her any detailed explanation of
what was wrong; that he did not use the term ‘wet rot’ or the term ‘dry rot’,
because it was his experience that lay persons were unaware of the significance
of those terms or the difference between one kind of rot and another; that some
persons tended to be unreasonably fearful when either of them was mentioned,
and it was his practice not to mention specific kinds of infestation. I accept
his evidence that what he said to her was just ‘damp’ or ‘damp-related
problems’.
I find that
Mrs Tamms was not unreasonable in relying on what Mr Rolls-King had told her.
She was, in a certain measure, cynical about South London Timber Preservation
Co, for the reasons which I have briefly mentioned. She was sceptical of their
advice that the whole floor needed replacing; sceptical because she herself
knew perfectly well that it was a new conversion which had been done in about
1980; that she was the first occupant of the flat, having bought it in 1981;
that there was no visible sign of damp; and that the building society had
released her own retention. And when Mr McDonald told her that the whole floor
needed to be replaced at some unspecified but no doubt considerable cost, she
was, not unreasonably, in my view, sceptical. And she acted perfectly properly,
in my judgment, in asking for an independent second opinion and, having regard
to Mr Rolls-King’s obvious skill and care in this matter, I think that she was
entitled to accept his judgment that there was damp or damp-related problems
under the floor, that it would cost about £500 or £600 to put right and that
the best course was to make an abatement in the purchase price of about that
amount and let the purchaser do whatever work was necessary.
I should say
that the next step, so far as she was concerned, was that when she returned
from her honeymoon, she found a report from South London Timber Preservation Co
indicating that repairs were necessary to an amount of £2,400 including £800 or
thereabouts for replastering — a great deal in excess of the figures which she
had been given by Mr Rolls-King, which no doubt served to exacerbate her
scepticism, having regard to the confidence which she had in Mr Rolls-King;
although in this respect I find that the figures put forward by South London
Timber Preservation Co, with the advantage of the further material which has
been acquired, were not excessive. Mr Rolls-King’s figures were on the
optimistic side, though to the figure of £500 or £600 I have mentioned has to
be added a figure of £400 to £500 in respect of plastering, so that the sum
total of Mr Rolls-King’s figure was in the order of £1,000. And I think that
perhaps he omitted the profit element that a builder would require.
But Mrs Tamms,
in my judgment, had reasonable ground to believe that the representation she
made in answer 20(5) was true, and I accept her evidence that she did believe
it was true. Accordingly, even if the plaintiffs had relied on the
representation, in my judgment, the defendant would have established the
defence (the burden being on her) under that subsection.
The
plaintiffs’ claim is also put at negligence in common law on the basis of Hedley
Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, namely
that the defendant made the representation of fact negligently, that is to say,
in breach of the duty of care. Assuming (as, for present purposes, I do assume,
though it has not been argued) that Mrs Tamms did have a duty of care to the
prospective purchasers, the burden of proving that she failed to take due care
would rest on the plaintiffs. I have already found that Mrs Tamms has
discharged the heavier burden that lies upon her under section 2(1) of the 1967
Act. And, having done that, the claim in negligence at common law also, in my
judgment, fails.
Before passing
from this part of the case, I should say that the preliminary inquiries were
prefaced by a disclaimer in these terms:
These replies
are given on behalf of the proposed vendor and are without
are believed to be correct but the accuracy is not guaranteed. They do not
obviate the need to make appropriate searches and enquiries and inspections.
In so far as
it is relevant, having regard to my other findings, I do find that such a
disclaimer would not have been sufficient to protect the defendant, and I refer
in this context to the decision of Dillon J (as he then was) in Walker v
Boyle [1982] 1 All ER 634, where he says:
My attention
has been drawn to certain small print which appears above the replies on the
form of preliminary inquiries. This small print reads as follows: ‘These
replies on behalf of the vendor are believed to be correct but accuracy is not
guaranteed and they do not obviate the need to make appropriate searches,
enquiries and inspections.’ This may be
a warning to a purchaser’s solicitor to do what any experienced solicitor would
know was his duty and make appropriate searches, inquiries and inspections, but
it cannot prevent the answers given from being representations of fact. . . .
Any vendor will know that that is the object of asking the questions, and will
know that the answers are likely to be relied on. A person who makes a
representation of fact cannot negative the representation by words such as
those in the small print which I have quoted. I accordingly ignore those words.
And I do the
same in this judgment.
Finally, I
ought, lest this matter goes any further and lest also it is considered in any
other context, to make findings in relation to damages. The plaintiffs’ claim
is under section 2(1) of the 1967 Act. By that Act, if the person making the
representation would be liable to damages in respect thereof had the
misrepresentation been made fraudulently, that person shall be so liable,
notwithstanding that the misrepresentation was not made fraudulently. In this
case, the representation — if I had found that there was an effective
representation — was not made fraudulently. But the damages are to be the same
as if it had been made fraudulently.
The principles
in regard to the damages for fraudulent misrepresentation were laid down by the
Court of Appeal in the well-known case of Doyle v Olby (Ironmongers)
Ltd [1969] 2 QB 158, where Lord Denning MR at p 167A said:
On principle
the distinction seems to be this: in contract, the defendant has made a promise
and broken it. The object of damages is to put the plaintiff in as good a
position, as far as money can do it, as if the promise had been performed. In
fraud, the defendant has been guilty of a deliberate wrong by inducing the
plaintiff to act to his detriment. The object of damages is to compensate the
plaintiff for all the loss he has suffered, so far, again, as money can do it.
In contract, the damages are limited to what may reasonably be supposed to have
been in the contemplation of the parties. In fraud, they are not so limited.
The defendant is bound to make reparation for all the actual damages directly
flowing from the fraudulent inducement. The person who has been defrauded is
entitled to say: ‘I would not have entered into this bargain at all but for
your representation. Owing to your fraud, I have not only lost all the money I
paid you, but, what is more, I have been put to a large amount of extra expense
as well and suffered this or that extra damages.’
Winn LJ at p
168F, put the law this way:
It appears to
me that in a case where there has been a breach of warranty or authority, and
still more clearly where there has been a tortious wrong consisting of a
fraudulent inducement, the proper starting-point for any court called upon to
consider what damages are recoverable by the defrauded person is to compare his
position before the representation was made to him with his position after it,
brought about by that representation, always bearing in mind that no element in
the consequential position can be regarded as attributable loss and damage if
it be too remote a consequence: it will be too remote not necessarily because
it was not contemplated by the representor, but in any case where the person
deceived has not himself behaved with reasonable prudence, reasonable common
sense, or can in any true sense be said to have been the author of his own
misfortune. The damage that he seeks to recover must have flowed directly from
the fraud perpetrated upon him.
In a case of
innocent misrepresentation (such as this would be if the plaintiffs succeeded)
the same principles apply as in the case of fraudulent misrepresentation. That
is to say that the plaintiff is entitled to recover, if he recovers at all, all
the loss and damage that flows, provided that it is not too remote or, to
borrow Lord Denning’s phrase, ‘not only all the lost money but, what is more,
the large amount of extra expenses as well and this or that extra damages’.
In my
judgment, in a case such as this where a misrepresentee has entered into a
contract on the strength of misrepresentation and has entered into the premises
and then discovered the loss, the damages which flow are the cost of putting
him in the position in which he would have been if the misrepresentation had
not been made. This includes the cost of putting it right and the cost of
consequential damages. The case where such works have had to be carried out is
different from those where no such work is required. An example of the latter
class is to be found in Saunders v Edwards [1987] 2 All ER 651,
where a flat was purchased on the representation that it had a roof terrace,
and it had not. Well, of course, there was no question of putting a roof
terrace in; the purchaser had to make do with a flat without a roof terrace.
And the measure of damages there was held to be the difference in value.
Another
well-known case in which the same point is made is Ford v White &
Co [1964] 1 WLR 885, where the land was purchased on the basis that a
restriction relating to it was not operative, when in fact it was. The
appropriate measure of damage there also was the difference in value. In that
case, as it happens, the learned judge found that the difference in value was
nil. But those are illustrations of that principle operating when no work has
to be done.
In a case such
as this where work does have to be done, in my judgment the same principle
operates, albeit in a different way, in that a reasonable cost for doing the
work is recoverable. An illustration of this is to be found in Perry v
Sidney Phillips & Son [1982] 1 WLR 1297. For example, in the judgment
of Lord Denning MR at p 1301F:
We now have to
consider how the damages are to be assessed. The cases show up many
differences. I need only draw attention to these:
First, where
there is a contract to build a wall or a house, or to do repairs to it, then if
the contractor does not do the work or does it badly, the employer is entitled,
by way of damages, to recover the reasonable cost of doing such work as is
reasonable to make good the breach. The cost is to be assessed at the time when
it would be reasonable for the employer to do it, having regard to all the
circumstances of the case, including therein any delay due to a denial of
liability by the contractor or the financial situation of the employer. . . .
Second, where
there is a contract by a prospective buyer with a surveyor under which the
surveyor agrees to survey a house and make a report on it — and he makes it
negligently — and the client buys the house on the faith of the report, then
the damages are to be assessed at the time of the breach, according to the
difference in price which the buyer would have given if the report had been
carefully made from that which he in fact gave owing to the negligence of the
surveyor. The surveyor gives no warranty that there are no defects other than
those in his report. There is no question of specific performance. The contract
has already been performed, albeit negligently. The buyer is not entitled to
remedy the defects and charge the cost to the surveyor. He is only entitled to
damages for the breach of contract or for negligence.
The Master of
the Rolls refers to Philips v Ward [1956] 1 WLR 471. That is an
illustration of the measure of damages in contract against a surveyor. But in
that case the cost of repairs never arose, as pointed out by Kerr LJ in his
judgment at p 1305:
The plaintiff
has sold the house and has changed his life by moving to another job and living
in another locality. So the question of doing the repairs, and of the actual
cost of the repairs, has never arisen. In these circumstances, this appeal has
proceeded on both sides on the basis that the costs of the repairs as such —
let alone the question as at what date — did not arise. For myself, I am not in
any way expressing any dissent from the approach of the judge, but I would say
that I would reserve my view as to whether in a case like this the approach by
way of cost of repairs is necessarily right. We have not heard the point argued
and it does not arise for decision.
In this case
the point has been argued and, in my judgment, it flows from the
principles in Doyle v Olby (Ironmongers) Ltd that the reasonable
loss flowing from the breach is recoverable.
Now, various
figures have been put to me and I have to bear in mind that if the plaintiffs
had succeeded they would have succeeded on the basis that there had been a
representation in relation to the dry rot and — although I regard this as
artificial — to some extent wet rot as well because, on any view, the
plaintiffs were well aware of the presence of damp.
But, doing the
best I can and having regard to the multiplications of the schedule P2 put in
front of me, the plaintiffs would, in my judgment, have recovered the sum of
£3,364.90 under the second head of item 1 of the schedule, less the sums in
respect of the damp-proof course and the plastering, which would result in a
figure, as I make it, of £2,482.65, plus £805, £178.05, £140, £37.17 and £250,
making a total of £3,892.87 under that head.
Under item 2
of the schedule P2, it is agreed that the plaintiffs would have been entitled
to recover heads A, B, C and E, which total £1,005.95, plus an arrangement fee
of £20, making a total of £1,025.95. In addition, the plaintiffs would have
been entitled to general damages for the vexation and inconvenience, and I bear
in mind that it was certainly a difficult time for them: the completion of the
works, the funding of the works, the obtaining of grants of additional building
society moneys took many months. They had to leave the house for six weeks and
they had this matter on their minds throughout most of 1984. They lost a
holiday when they did a certain amount of decorating themselves. In my judgment
the appropriate
The total
plaintiffs’ claim, then, would amount to £6,918.82.
One final
question arises and that is the effect, if any, which I ought to give to the
fact that part of that work was funded by a grant which the plaintiffs obtained
from the local authority. It was a discretionary grant, and in December 1983 it
would not have been possible to say whether the grant was obtained or not. In
fact it was obtained.
In this
connection my attention has been drawn to a decision of Popplewell J of June 27
1984 reported in Estates Gazette*. In that case the learned judge held
that the proper method of assessing damages was the difference in value between
what the plaintiff actually paid and what the market value of the house was in
its then condition. Accordingly, the measure of damages had to be assessed as
at the date of the breach. There was in that case also, however, a
discretionary grant which was obtained, and it was urged on behalf of the
defendant that the grant should be taken into account. The plaintiff objected
that the grant was payable at another date, that is, not until after the
breach; that it was only a small proportion of the actual building costs; and
that it was irrelevant on the principles of Redpath v Belfast &
County Down Railway [1947] NI 167, 170, and Parry v Cleaver
[1970] AC 1. Popplewell J expressed himself as being clearly of the view that
the sum paid by way of grant does not fall to be deducted, first, because it is
irrelevant to a claim where the difference in value is the measure of damage
and, second, because there is a collateral benefit which does not have to be
taken into account.
*Editor’s
note: Treml v Ernest W Gibson & Partners [1984] EGD 922;
(1984) 272 EG 68.
It is to be
noted that that was a case where the appropriate measure of damages was the
difference in value. Accordingly, the damages had to be assessed as at a
particular date. This is not such a case. This is a case where the plaintiffs
would be entitled under the principles of Doyle’s case to the loss
flowing from the breach, which includes the direct losses which I have found it
unnecessary to describe in detail but the amounts of which are agreed.
But the
expenditure which the plaintiffs incurred was in some part met from the local
authority grant. Now, in my judgment, this raises different principles from
those where the measure of damage is the difference in value. The measure of
damage is here the loss that actually is sustained — the actual out-of-pocket
loss. The point of time at which the loss is considered is when the loss has
been sustained. In such a case it is possible to say whether some grant has
been obtained and whether some part of the work has been funded elsewhere.
In my
judgment, that part of the grant which was attributable to work which was
carried out in consequence of the defendant’s misrepresentation should be taken
into account. There has been no evidence as to what that figure is. The work
covered by the grant included a number of areas which were not the subject of
these proceedings. Accordingly, I am unable to make a finding of the precise
figure that should be set off by way of credit against that sum of £6,918.82.
However, in view of my findings on the primary issue, as I have already
indicated, the plaintiffs’ claim fails.
No order was
made in regard to costs except for legal aid taxation in the case of both
parties.
