Cremdean Properties Ltd and another v Nash and others

Contracts for sale of two properties–Joint tender documents–Alleged innocent misrepresentation as to lettable office space–Section 3 of Misrepresentation Act 1967–Preliminary issue before trial of action–Effect on liability of disclaimer of responsibility for accuracy of particulars and of provision that no error, omission or misdescription shall annul sale–Liability not necessarily excluded by disclaimer–Action must proceed–Decision of importance to estate agents–Leave to appeal given This was a preliminary issue in which the applicant was George Percy Nash, the first defendant in an action for rescission of two contracts brought by Cremdean Properties Ltd and Compass Securities Ltd against the first defendant and against six trustees of the Mission House of St Paul in respect of properties at 16 and 17 Portland Square, Bristol. The six trustees, the second defendants, took no part in the present interlocutory proceedings, which were concerned with the legal effect, having regard to section 3 of the Misrepresentation Act 1967, of a provision in the joint tender documents purporting to exclude liability for misdescription. In these proceedings the first defendant asked for an order placing a construction on the provision which would have disposed of the action in favour of the defendants. G H Newsom QC and Spencer Maurice (instructed by Church, Adams, Tatham & Co, agents for Barnett & Leonard, of Bristol) appeared for the applicant (the first defendant); P V Baker QC and Gordon Hodgson (instructed by Portner & Jaskel) represented the respondents (plaintiffs). Giving judgment, FOX J said: This is a preliminary issue in an action in which the plaintiffs seek rescission on grounds of misrepresentation of certain agreements for the purchase by the plaintiffs from the defendants of some property in Bristol. The material allegations in the statement of claim are, briefly, as follows: (i)  Prior to November 27 1973 the first defendant owned 16 Portland Square, Bristol, and the second defendants, as trustees of a charity, owned 17 Portland Square. (ii)  Before October 1973 the defendants had obtained outline planning permission for the comprehensive development of both properties and consequently decided to sell their respective interests by joint tender (but so that each defendant would enter into independent contracts with any purchaser) and to impose upon the purchaser a positive obligation to carry out the proposed development and to include therein a new church hall for the second defendants. (iii)  On October 17 1973 the defendants by their agents issued joint tender documents embodying the decision which I have mentioned and inviting tenders for the premises. The tender documents included a folder which contained, inter alia, special conditions of sale, a description of the premises, details of the planning consent and a scale drawing specifying in outline how the premises were to be developed. (iv)  By the tender documents the defendants represented that approximately 17,900 sq ft of lettable office space, in addition to the new church hall, could be accommodated on the site of the premises within the elevations of the buildings required by the scale drawings and that such lettable office space be accommodated within a floor space index of 1.8 stipulated by the planning authority. (v)  In reliance upon the representations the plaintiffs on November 14 1973 submitted an offer, as required by the tender, for the premises for the sum of about £552,000. (vi)  The offer was accepted by both defendants on November 27 1973 and the sum of £298,750 was allocated by the defendants as the consideration for the purchase of the first defendant’s property. (vii)  The agreement with the first defendant was completed by a conveyance of February 5 1973. The agreement with the second defendants has not been completed. (viii)  The representations which I have referred to in paragraph (iv) were false in that on the true dimensions of the premises within a floor space index of 1.8 only 14,700 sq ft of lettable office space could be accommodated on the site. The scale drawing was false in that: (a)    It showed the listed buildings at the front to be smaller than they in fact were thereby falsely representing that more new office space could be accommodated on the premises than was in fact so; (b)    It indicated in a schedule that 17,588 sq ft of lettable office space (allowing for the church hall) could be accommodated on the premises whereas in fact no more than 14,700 sq ft could be so accommodated; (c)    It indicated by measurement that within the elevations of the buildings shown thereon 18,203 sq ft of lettable office space could be accommodated within the site whereas within such elevations when corrected only 14,700 sq ft of lettable office space could be accommodated. 59 On these allegations the plaintiffs claim rescission of both agreements and ancillary relief. I should add here that while the folder included in the tender documents referred to the attached drawing LPSO 2A the drawings actually attached were numbered LPSO 2C. By a letter of November 7 1973 the defendants’ agents asked that the plaintiffs, in submitting their tender, should on the folder alter the drawing number in ink. The folder contained on its back a form of tender whereby the person making the tender offered to purchase ‘subject to the foregoing conditions and I/we agreed that in the event of this offer being accepted in accordance with the above conditions on or before the date named in the conditions for the completion of the purchase I/we will pay the said purchase money and carry out and complete the purchase in accordance with the conditions.’  As I have already mentioned the conditions of sale are set out in the folder. The first defendant by his defence in effect denies that any such representations as alleged were made or if made that they were false or, if false, that they materially affected the description of the property. The first defendant further relies upon the following statement (which I will call ‘the notice’) which appears at the bottom of the final page of the special conditions of sale set out in the folder: Messrs Lalonde Brothers & Parham for themselves for the vendors or landlords whose agents they are give notice that (a) these particulars are prepared for the convenience of an intending purchaser or tenant and although they are believed to be correct their accuracy is not guaranteed and any error omission or misdescription shall not annul the sale or be grounds on which compensation may be claimed and neither do they constitute any part of an offer of a contract (b) any intending purchaser or tenant must satisfy himself by inspection or otherwise as to the correctness of each of the statements contained in these particulars. In view of that provision the first defendant says that on no view is he under any liability. There was, he says, no misrepresentation; the plaintiffs were told that they must satisfy themselves as to the correctness of any statement. The plaintiffs contend that the notice is void by reason of section 3 of the Misrepresentation Act 1967. That statute enables relief to be given to a purchaser in respect of a misrepresentation even though, as in the case of the sale by the first defendant, the contract has been completed. Section 3 of the Act provides as follows: ‘If any agreement (whether made before or after the commencement of this Act) contains a provision which would exclude or restrict: (a) any liability to which a party to a contract may be subject by reason of any misrepresentation made by him before the contract was made; or (b) any remedy available to another party to the contract by reason of such a misrepresentation; that provision shall be of no effect except to the extent (if any) that, in any proceedings arising out of the contract, the court or arbitrator may allow reliance on it as being fair and reasonable in the circumstances of the case.’ By an order of the master made upon the application of the first defendant (and opposed by the plaintiffs) it was directed that the following question be decided as a preliminary issue: Whether on the true construction of the joint tender documents referred to in paragraph 3 of the statement of claim the provision contained in such joint tender documents and more particularly set out in paragraph 4 of the defence of the first defendant: (a)    is (as alleged in paragraph 2 of the reply to the defence of the first defendant) void and of no effect by virtue of section 3 of the Misrepresentation Act 1967; or (b)    takes effect so as to exclude any liability to which by virtue of the said Act the first defendant might otherwise be subject on account of any inaccuracy in the information contained in such tender document. The first defendant asks for an order in the sense of paragraph (b) which would dispose of the action. I come then to section 3 of the Misrepresentation Act 1967. By its terms it only applies to a provision in an agreement. In my view the notice is such a provision. It seems to me that the contract was entered into on the basis that the notice should be applicable to the contract. In my view, therefore, section 3 is capable of applying to the notice. The next question is whether the content of the notice is such as to make the section applicable to the whole or some part of it. The section applies to a provision which would exclude or restrict: (a)    any liability to which a party to a contract may be subject by reason of any misrepresentation made by him before the contract; or (b)   any remedy available to another party by reason of such misrepresentation. In practice, therefore, the essential question is whether there was a misrepresentation. If there was, then a provision which seeks to exclude or restrict liabilities or remedies arising from that misrepresentation is within the mischief of the section and cannot be relied upon by the defendant. And I do not think it can make any difference what is the form of that provision. Section 3 is in the widest terms and strikes down any provision which excludes or restricts such liability or remedy as is specified in the section. I was referred to the decision of Brightman J in Overbrooke Estates Ltd v Glencombe Properties Ltd [1974] 1 WLR 1335. I do not think that case assists me here. It was concerned only with the ability of a principal publicly to limit the ostensible authority of his agent. The result, in my view, is that, if the true analysis in the present case is that there was a misrepresentation and the first defendant has to rely upon the notice to relieve him from the consequences of that misrepresentation, section 3 will prohibit such reliance. I come then to the contents of the notice. They fall, I think, into the following parts: (i)    The particulars are prepared for the convenience of an intending purchaser. That I think is more or less neutral in its effect. (ii)   Although the particulars are intended to be correct their accuracy cannot be guaranteed and any error omission or misdescription shall not annul the sale or be grounds on which compensation may be claimed. In my view, if there was a misrepresentation, that provision comes within section 3 in that it excludes a remedy which would otherwise be open to the plaintiff by reason of the misrepresentation. (iii)  The particulars do not ‘constitute any part of an offer of a contract.’  This is not very happily drawn but I take it to mean simply that the sending out of the tender documents was not an offer by the defendants. That, it seems to me, is unobjectionable. (iv)  Paragraph (b) of the statement provides that ‘any intending purchaser or tenant must satisfy himself by inspection or otherwise as to the correctness of each of the statements contained in these particulars.’  The first defendant says that in view of this provision (at any rate when read with the rest of the notice) he can be under no liability. The action, it is said, is based upon misrepresentation. There never was any misrepresentation since the plaintiffs were, by the notice, put on inquiry and told to go and check the facts for themselves. Equally, it is said, there is no question of the application of the Misrepresentation Act 1967; the Act is concerned with misrepresentations and there were none. As a preliminary to considering that contention I should observe that the issue now before me is, in effect, a proceeding by way of demurrer. I must, therefore, assume the facts60 alleged in the statement of claim. These facts so far as material are (a) that representations were made by the defendants (b) that the plaintiffs made their offers in reliance upon those representations (c) that the representations were false. In these circumstances it seems an odd result that the court should now, in effect, put an end to this action on the ground that there never was a misrepresentation and without ascertaining the facts at all. But putting that aside it seems to me to be going altogether too far, at this stage of the proceedings, to assume that the notice is conclusive evidence that the plaintiffs were not induced to enter into this contract by reason of false statements contained in the particulars. Theoretically it seems to me it would be open to the plaintiffs to prove at the trial that, notwithstanding the notice, they were induced to enter into the contract by such statements, though the notice will or may be a material matter to be taken into account in deciding that. One cannot, it seems to me, determine whether there has been a misrepresentation inducing a contract without ascertaining all the facts. The decision of the Court of Appeal in Gosling v Anderson (1971) 223 EG 1743, to which Mr Baker referred me, exemplifies, though on widely different facts, this principle. The plaintiff, Miss Gosling, wanted to buy a flat from the defendant. She was particularly anxious to have a garage. Doubt arose about planning permission. The vendor’s agent wrote a letter indicating that there was planning permission. Miss Gosling’s solicitor was not satisfied and wrote to the local authority but there was delay in replying. The defendant’s agent then wrote again saying that there should not be any difficulty about planning permission but making it plain that so far as the defendant was concerned all that was being sold was a flat with a parking area. Despite the doubts Miss Gosling decided to go ahead and complete. Planning permission was refused. It was held that, notwithstanding that she deliberately took the risk of going ahead, she was entitled, on the facts, to establish that she was induced to enter into the contract by the vendor’s misrepresentation. The facts, as I have said, are widely different from the present but the case shows, I think, that the question whether there was a misrepresentation is something to be decided in the context of all the facts. For example, in the present case, take the position as to the scale drawing. The plaintiffs allege, in effect, that the drawing, when measured, indicated lettable office space in excess of 17,900 sq ft but that the drawing was wrong as a drawing. There might, it seems to me, be questions, depending on expert evidence, as to what a purchaser could reasonably assume in relation to such a drawing. In the circumstances I think that it would be wrong for me to assume that the plaintiffs could not at the trial establish that they were in fact induced to purchase by misrepresentation by the defendants. If there was such a misrepresentation then it seems to me that the existence of the notice is not an answer to the first defendant’s liability. Accordingly, I think it would be quite unsafe, at this stage, to assume that the notice disposes of any question of liability. In my view therefore the first defendant is not entitled to the declaration that he seeks and the action must proceed to trial. I should add that the alternative declaration set forth in (a) of the issue as formulated (namely that the notice is invalid) does not seem to me to be appropriate on the view of the matter which I have taken as set out above. Parts of the notice are, on any view, unobjectionable. Further, as a purely factual matter at any rate, the notice may be material in determining whether there was a misrepresentation or whether the plaintiffs were induced to enter into the contract in reliance upon it. I quite appreciate Mr Baker’s argument that the effect of the notice is to exclude or restrict liability or remedy for misrepresentation and is, therefore, simply invalid. But, as I have indicated, it seems to me that the notice may, at the least, have validity as an element in determining whether there was a misrepresentation upon which the plaintiffs relied. If parts are invalid, questions of severance may arise. Since the case must go to trial in any event it seems to me that the proper time to determine any general questions as to the validity of the notice is at the trial itself. The form of the judge’s direction was: ‘The court being of the opinion that the provision does not necessarily take effect so as to exclude any such liability as is referred to in paragraph (b) of the issue, and that accordingly the action must proceed to trial, the court does not think fit to make any order on the preliminary point.’  The respondents to the present application (the plaintiffs in the action) were given their costs of the application in any event. Leave to appeal was given in view of the importance of the issue as to the construction of the Misrepresentation Act 1967 and the validity of exclusion clauses.