In Lambson Fine Chemicals Ltd v Merlion Capital Housing Ltd [2008] EWHC 168 (TCC); [2008] PLSCS 40, the court had to decide whether a seller had misled a buyer concerning the extent to which a property had been contaminated by chemicals and whether the contract for sale prevented the buyer from pursuing a claim.
The property was sold subject to any information that was revealed by the buyer’s searches and enquiries (or that would have been revealed by any searches and enquiries that a prudent buyer ought to have made). The contract for sale also provided that the property was sold subject to any matters that would have been evident on an inspection or survey, and contained an acknowledgement that the buyer had had every opportunity to investigate the site. In addition, the buyer confirmed that it had been given all requisite information to assess the state of the property and agreed that it was buying the land with full knowledge of its condition.
Unsurprisingly, the buyer commissioned an environmental survey. As a safeguard, it also requested a comfort letter confirming that the seller did not know of any contamination, other than any that was revealed in the environmental report. The comfort letter was referred to in, and was annexed to, the contract for sale.
The judge read the letter and weighed the evidence before deciding that the seller had known no more about the extent of the property’s contamination than had the buyer and its environmental consultants (or what they ought to have known). The judge went on to consider the effect of the boilerplate clauses that sought to pass the risk of contamination to the buyer. The judge held that the comfort letter and the boilerplate clauses did not conflict and ruled that the seller had successfully assigned the risk of unforeseen ground conditions to the buyer.
The judge’s decision exonerated the seller from liability for the cost of remediation work that the buyer’s environmental consultants had failed to recommend. However, the judge also considered the effect of the exclusion and “entire agreement” clauses in the sale agreement (upon which the seller had relied to defeat any claim for misrepresentation).
The judge rejected the seller’s argument that the “entire agreement” clause was engaged on the ground that the comfort letter was not superseded by the agreement for sale; it was annexed to and formed part of the agreement. The seller’s argument that the provisions in the sale contract confirming that the buyer had not relied upon any representations, other than those that had been made in written replies to pre-contract enquires, fared no better. The judge ruled that the provisions would not have operated to exclude reliance upon the comfort letter because that had been provided in response to the buyer’s pre-contract enquiries, and also because the seller had specifically acknowledged in the comfort letter that the buyer would be relying upon what it said. Food for thought indeed.
Allyson Colby is a property law consultant
