Sale of land — Easement — Mistake — Property development — Sewer found on land — Purchaser seeking to rescind contract for sale — Judge holding that sale could be rescinded — Court of Appeal reversing that decision — Judgment for appellant vendors
The council sold 6.71 acres of land, which had been used for nearly 20 years as a school playing field to the plaintiffs, a firm of builders, who intended to develop an housing estate. The sale was completed in March 1989. By October 1989 they had still not obtained planning permission for the development and the value of the land had fallen due to the general decline in market prices. The contract price in 1988 was £5,082,000. The value in 1990 was less than half that figure. The builders had borrowed the whole of the amount which they had paid and interest rates were high. In October 1990 a sewage pipe was discovered crossing the land diagonally about two metres below the surface. Because the land had been used as a playing field, the manhole, which would have revealed its existence had been covered and grassed over. The pipe carried foul sewage as opposed to surface water drainage from a neighbouring block of flats owned by the council. It discharged into a public sewer outside the boundary on the far corner of the site. It also served a building which had been constructed on that part of the site, but which would be demolished to make room for the housing development planned. Neither the builders nor the council at the time of sale knew of the existence of the sewer. The builders sought to set aside the contract and recover the sum of £5,082,000 which they had paid in 1989 on the grounds of misrepresentation and mistake. The High Court held that they were entitled to do so. The council appealed.
Held The appeal was allowed.
1. The sewer was a defect in title, but not in practice a serious problem.
2. At completion the purchaser accepted the title offered by the vendor and the latter’s contractual obligations to deduce title were discharged. They were replaced by qualified covenants for title expressed or implied in the conveyance or transfer.
3. In this case the contract incorporated the National Conditions of Sale including condition 14 and special condition 17 both of which provided that the purchaser was deemed to take subject to all easements. Prima facie the sewer was an easement and therefore those conditions would have required the plaintiff to accept the title notwithstanding its existence. In any case the plaintiff accepted title at completion before it knew of the sewer.
4. The council was selling land with planning permission but was not warranting that it was fit for any particular purpose. It was undertaking to disclose all easements and incumbrances of which it had knowledge or means of knowledge, but subject to that exception it required the purchaser to take the risk of incumbrances which might affect its ability to use the land. It was impossible to construe the contract as also exposing the council to liability for certain incumbrances of which it had no knowledge or means of knowledge.
5. Further there was no misrepresentation in the replies to inquiries before contract.
6. The contract stated in express terms that it was subject to all easements other than those of which the vendor knew or had the means of knowledge. That allocated the risk of such incumbrances to the buyer and left no room for rescission on the grounds of mistake.
Terence Etherton QC and Steven Kovats (instructed by Sharpe Pritchard) appeared for the council; Jules Sher QC and Reziya Harrison (instructed by Miller & Co) appeared for the builders.
