Tenant exercising right to buy – Local authority landlords failing to notify tenant of structural defect in property – Tenant bringing action for breach of statutory duty and misrepresentation – Judge finding in favour of tenant and awarding damages – Local authority appealing – Whether remedy of misrepresentation available – Part V of Housing Act 1985 and section 2 of Misrepresentation Act 1967 – Appeal allowed
The first respondent (R) and her son were tenants of the appellant council occupying a system-built house of the Orlit type, which was constructed using precast reinforced concrete (PRC) frames. In January 1991 R made an application to purchase the property under Part V of the Housing Act 1985 (the right-to-buy provisions). At that time, local authorities were aware that Orlit properties suffered from potential defects, one of which was “carbonation” of the concrete used in the construction of the house. A second type of defect, “conversion”, was likely to be found in PRC houses built using high aluminia concrete (HAC).
In January 1991 the council sent a letter to R, informing her of the carbonation defect, but not of the use or presence of HAC and the additional hazards associated with it. The council valued the property at an open market value of £24,000, from which R was entitled to the maximum 60% discount under section 126 of the 1985 Act. Consequently, the council offered the property to R at £9,800. Section 3 of the offer notice stated: “This property is defined as defective under the Housing Act 1985”, but gave no indication of the presence of HAC or its possible effects. The purchase was completed in December 1991. In 1996 the council resolved to demolish any Orlit houses that they still owned.
The defects in R’s property rendered it valueless so far as any resale was concerned, and R accordingly commenced proceedings against the council for: (i) breach of their statutory duty under section 125(4A) of the 1985 Act; and (ii) misrepresentation under section 2(1) of the Misrepresentation Act 1967. The judge found the council liable on both counts, and awarded damages to R in the sum of £25,686.
The council appealed, contending that no claim could lie against them for misrepresentation under section 2(1) of the 1967 Act because the remedy of damages for misrepresentation was dependent upon a claimant showing that he had “entered into a contract after the representation has been made to him”. They submitted that no contract was entered into between a tenant and a council upon a purchase under the right-to-buy provisions, and that R’s right to eventual transfer of the freehold was created by, and solely derived from, the 1985 Act. The council further contended that the judge had erred in his assessment of damages, and that the “costs floor” provisions contained in section 131 of the 1985 Act and the Housing (Right to Buy) (Cost Floor) (England) Determination 1998 should be applied to reduce R’s damages under the head of Loss of Right to Buy/Loss of Repairing Covenant.
Held: The appeal was allowed.
1. Having regard to the provisions in Part V of the 1985 Act, the additional remedy of an action for misrepresentation under section 2 of the 1967 Act was not available. The obligation of a landlord, faced with the exercise by a secure tenant of the right to buy, derived solely from the 1985 Act. The Act laid down a prescriptive procedure in terms of notice of claim by the tenant, admission or denial of the tenant’s right to buy by the landlord, the landlord’s notice of purchase price, and other matters. Thereafter, the price and terms upon which the property was to be conveyed were all provided for, with a machinery for the resolution of any disputed matter. The word “contract” in section 2 was to be given its ordinary meaning, namely a consensual agreement arising upon the acceptance by one party of the terms of an offer made by the other. It was impossible to characterise the exercise of the tenant’s right to buy as a consensual agreement. Accordingly, while the appellants had an obligation to include in their notice a description of the relevant structural defect in the property, their omission to do so gave R only a remedy for breach of statutory duty under the 1985 Act, and not a remedy under section 2 of the 1967 Act. The judge’s finding of liability for misrepresentation was set aside: Colin v Duke of Westminster [1985] 2 WLR 553 applied.
2. The appellants’ application to rely upon the 1998 Determination was too late. Any error of omission or oversight in bringing it to the judge’s attention was principally theirs, since, in the light of the legal information accessible to R and the way in which she had put her case from the outset, the existence and relevance of the determination was a matter particularly in the appellants’ knowledge. Given that various practitioners’ texts had omitted any reference to the determination, R was exonerated from blame for the omission.
3. However, the judge had erred in awarding certain sums to R, and the amount was to be reduced by £4,800.
Alexander Hill-Smith (instructed by Everatt & Co, of Evesham) appeared for the appellants; Giles Harrison-Hall (instructed by Hulme & Co, of Worcester) appeared for the respondents.
Sarah Addenbrooke, barrister
