Cremdean Properties Ltd and another v Nash and others

Alleged innocent misrepresentation as to lettable office space–Section 3 of Misrepresentation Act 1967–Disclaimer of liability in footnote to special conditions of sale by tender–Effect of disclaimer raised as a preliminary issue–Submission that it excluded liability rejected–Question whether it could be relied on under the exception in section 3 as being "fair and reasonable" a matter for determination at the trial of the action–Appeal from Fox J’s decision dismissed–Judgments of interest to estate agents This was an appeal by George Percy Nash (the first defendant) against a decision by Fox J, reported at (1977) 241 EG 837, [1977] 1 EGLR 58, on a preliminary issue arising in proceedings brought by Cremdean Properties Ltd and Compass Securities Ltd as plaintiffs against the first defendant and six trustees of the Mission House of St Paul (the second defendants) in respect of the sale to the plaintiffs of a block of properties at 16 and 17 Portland Square, Bristol. The plaintiffs in the action sought rescission of the contracts of sale, and in the alternative damages, on the ground of misrepresentation in the invitation to tender. The first defendant applied for and obtained a direction that, as a preliminary issue, the question should be decided whether a disclaimer contained in a footnote to the special conditions of sale was effective to exclude liability. An affirmative answer would have put an end to the action. Fox J, however, rejected the first defendant’s submission that the disclaimer was sufficient in itself to exclude liability and ordered that the action should proceed to trial. The second defendants took no part in these interlocutory proceedings on the preliminary issue. G H Newsom QC and Spencer Maurice (instructed by Church Adams, Tatham & Co, agents for Barnett & Leonard, of Bristol) appeared on behalf of the first defendant (appellant); Paul Baker QC and Gordon Hodgson (instructed by Peter Mallack & Co) represented the plaintiffs (respondents). Giving the first judgment at the invitation of Buckley LJ, BRIDGE LJ said: In 1973 the appellants were minded to sell an important block of property in Bristol for redevelopment, mainly as offices, for which outline planning permission had already been secured. The first defendant was the owner of part of the property; the other defendants, who are trustees of a charity, were the owners in that capacity of the other part. The way they went about their proposal was to instruct agents to act for them jointly, and the agents published a document inviting prospective purchasers to tender for the whole block. The latest date by which tenders were to be received was November 14 1973. On November 13 1973 the plaintiffs put in a tender in the sum of £552,500, which was accepted. It is perhaps not without significance to recall, as a matter of background to the present dispute, that November 1973 was a date at or about the peak of the boom in property values that characterised the early 1970s in this country. The acceptance of the plaintiffs’ tender resulted in the conclusion of two separate contracts, a contract to purchase the first defendant’s property for £298,750, and a contract to purchase the property of the charity trustees for £253,750. The contract between the plaintiffs and the first defendant was completed by a conveyance dated February 5 1974; the contract between the plaintiffs and the charity trustees was never in fact completed. On August 7 1974 the plaintiffs issued their writ in this action, claiming rescission of both contracts on the ground of misrepresentation and, in the alternative, damages against both sets of defendants. In the event, the proceedings have subsequently been discontinued as against the charity trustees; they have evidently arrived at some acceptable compromise and we are only concerned with the dispute between the plaintiffs and the first defendant. Prior to 1967, there being no allegation of fraud or anything like it against the defendants in the plaintiffs’ pleading, the plaintiffs could not have succeeded in rescinding the contract with the first defendant because, as I have already stated, it had been completed by conveyance before the writ was issued. But the plaintiffs in that regard are now entitled to rely, and do rely, on the provisions of section 1 of the Misrepresentation Act 1967, which, so far as is material, provides as follows: "Where a person has entered into a contract after a misrepresentation has been made to him, and . . . (b) the contract has been performed . . . then, if otherwise he would be entitled to rescind the contract without alleging fraud, he shall be so entitled, subject to the provisions of this Act, notwithstanding the matters mentioned in" paragraph (b) of this section. I also mention in passing, though it is not directly relevant for the purposes of the present appeal, that section 2 of the Act of 1967 creates a novel creature in the law in the shape of a liability upon a representor who makes an innocent misrepresentation in the course of negotiation which results in the conclusion of a contract which may, in the circumstances indicated in this section, sound in damages. The alleged misrepresentation on which the plaintiffs rely in this action relates to the amount of lettable office space which could be accommodated in the planning permission with which the property in question was sold. In that regard the plaintiffs rely, and rely exclusively, upon a representation said to have been made in the published document, the invitation to tender which resulted in the plaintiffs’ successful tender being made. Similarly the first defendant, in his pleaded case, relies upon the terms of that document for the proposition on which the first defendant relies, that there has been no misrepresentation, or no misrepresentation upon which, for the purposes of the Act of 1967, the plaintiffs are entitled to rely. I turn at once to the document and refer as far as necessary to its relevant terms. It is headed, in large letters: "For sale by tender, 16-17, Portland Square, Bristol". Then81 follows the all-important sentence on which the plaintiffs rely: "On instructions from"–and the several defendants are named–"these premises are for sale by tender, with the benefit of planning consent for approximately 17,900 sq ft of offices, a new church hall and 8 car parking spaces"; the words "17,900 sq ft of offices" are emphasised by being printed in slightly heavier type than the remainder of the sentence. The document also incorporates a plan, which in turn embodies in the legend a schedule of lettable office areas on different floors of the proposed new development, which is by way of substantiation of the broad proposition in the initial sentence that the new development will make provision for 17,900 sq ft of lettable office space. Two pages of the document are headed "Special Conditions of Sale by Tender" and under that heading there follow 18 numbered clauses and 2 schedules. There is a footnote to the special conditions of sale by tender, on which the first defendant relies, which reads as follows: "Messrs Lalonde Bros & Parham"–they were the estate agents acting for the defendants in relation to the proposed sale–"for themselves, for the vendors or landlord 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 the pleadings the plaintiffs rely exclusively on an alleged misrepresentation in the tender document, in that the amount of office space which the new development permits is much less than 17,900 sq ft. By their defence the defendants rely on the terms of the footnote to the special conditions of sale by tender. The trial of a preliminary point arising upon the construction of the document was ordered, and in relation to that preliminary point the first defendant claims a declaration that on the true construction of the document the provision contained in the footnote to the special conditions was effective so as to exclude any liability to which the first defendant might otherwise be subject by virtue of the Misrepresentation Act 1967 on account of any inaccuracy in the information contained in the tender document. The matter came for decision before Fox J on January 14 of this year. He held against the submission made to that effect on the part of the defendant and made no order on the defendant’s application. The first defendant appeals against that decision. If the Act of 1967 stopped short at section 2 it might very well follow without argument that the terms of the footnote to the special conditions are effective to exclude any liability for misrepresentation which would otherwise fall upon the first defendant. But the heart of the matter turns upon the provisions of section 3 of the Misrepresentation Act, which is in these terms: 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. The argument for the plaintiffs before the learned judge, which the learned judge accepted, was that subject to the exception, which of course would be a matter for consideration at the trial and not on the determination of a preliminary point, that section is operative to invalidate the terms of the footnote relied upon by the first defendants in so far as that footnote would otherwise be effective to exclude any liability under the Misrepresentation Act, for an innocent misrepresentation leading to the contract. Mr Newsom’s able argument on behalf of the defendant can really be summarised very shortly. In effect what he says is this. The terms of the footnote are not simply, if contractual at all, a contractual exclusion either of any liability to which the defendant would otherwise be subject for any misrepresentation in the document, or of any remedy otherwise available on that ground to the plaintiff. The footnote is effective, so the argument runs, to nullify any representation in the document altogether; it is effective, so it is said, to bring about a situation in law as if no representation at all had ever been made. For my part, I am quite unable to accept that argument. I reject it primarily on the simple basis that on no reading of the language of the footnote could it have the remarkable effect contended for. One may usefully analyse the footnote by dividing it into three parts. The first part is embodied in the words: "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. . . ."  That is something quite different from saying "any representation in this document shall be deemed not to be a representation."  On the contrary, this part of the footnote is clearly intended to exclude contractual liability for the accuracy of any representation; so far from saying that there has been no representation, it is reinforcing the fact that there have been representations by indicating that they are believed to be correct. The second part of the footnote is embodied in the words: ". . . any error, omission or misdescription shall not annual the sale or be grounds on which compensation may be claimed"–that, I think Mr Newsom concedes, is nothing more or less than a purported exclusion of liability which would otherwise accrue on the ground of any misrepresentation in the statements to be found elsewhere in the document. Finally, the third part of the footnote is embodied in the words: "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."  That part of the footnote may have considerable importance when this action comes to trial, as bearing upon the question of fact that will arise at the trial, as to whether the plaintiffs relied upon any misrepresentation. But for present purposes we, of course, have to assume the truth of what is pleaded, namely, that the representation as to office space was false and that the plaintiffs relied upon the alleged misrepresentation. Clearly the third part of this footnote, again on any reading of its language, does not amount even to a purported annulment of the very existence of any representation embodied in the earlier parts of this document. In support of his argument Mr Newsom relied upon a decision of Brightman J in a case called Overbrooke Estates Ltd v Glencombe Properties Ltd reported in [1974] 1 WLR 1335 [also (1974) 232 EG 829]. That was a case where the plaintiff vendors were seeking to enforce a contract of sale made through auctioneers and where the defendant purchasers sought to rely upon an alleged misrepresentation by the auctioneers to avoid their liability under the contract. It was a case in which the auction particulars included a sentence in the following terms: "The vendors do not make or give, and neither the auctioneers nor any person in the employment of the auctioneers has any authority to make or give any representation or warranty in relation to these properties."  It was alleged that, that clause notwithstanding, subsequently the auctioneers, before the defendants contracted to purchase the property, had made certain oral and inaccurate representations about some of its attributes, and82 it was argued on behalf of the defendants that the clause in the auction particulars purporting to limit the auctioneers’ authority to make any representations on the vendors’ behalf, was a clause excluding, or purporting to exclude, or limit, liability, which could only take effect subject to the provisions of section 3 of the Misrepresentation Act 1967. Brightman J deals with that argument at p 1341 of the report, in the following way: "Mr Irvine’s argument is as follows. The words in section 3(a), ‘. . . misrepresentation made by him before the contract was made; . . . ‘ must include a misrepresentation made by the contracting party’s agent. The authority of the contracting party’s agent in such a case is a necessary ingredient of any liability sought to be imposed on such contracting party. Therefore a provision restricting the ostensible authority of the agent is a provision which restricts the liability of the contracting party for the misrepresentation. Therefore, if such a provision is relied upon to negative the principal’s liability for a misrepresentation, the court has to consider what is fair and reasonable in the circumstances of the case and that can only be done in the course of the trial of the action. To put the matter more shortly, condition R(b)"–that was the condition in question–"excludes or restricts liability because it excludes or restricts an essential ingredient of liability, namely, the ostensible authority of Willmotts"–they were the auctioneers. Brightman J goes on: "In my judgment section 3 of the Act will not bear the load which Mr Irvine seeks to place upon it. In my view the section only applies to a provision which would exclude or restrict liability for a misrepresentation made by a party or his duly authorised agent, including of course an agent with ostensible authority. The section does not, in my judgment, in any way qualify the right of a principal publicly to limit the otherwise ostensible authority of his agent. The defendants’ second argument fails." I respectfully agree entirely with the whole of that reasoning. With respect to Mr Newsom’s argument I am unable to see that it has any application at all to the facts of the present case, because there never was any question here but that the agents acting for the first defendant and the other defendants, when they published the document on which the plaintiffs rely as embodying the relevant misrepresentation, had the full authority of their principals to say what they did say in the document. It is one thing to say that section 3 does not inhibit a principal from publicly giving notice limiting the ostensible authority of his agents; it is quite another thing to say that a principal can circumvent the plainly intended effect of section 3 by a clause excluding his own liability for a representation which he has undoubtedly made. I am quite content to found my judgment in this case on the proposition that the language of the footnote relied upon by Mr Newsom simply does not, on its true interpretation, have the effect contended for. But I would go further and say that if the ingenuity of a draftsman could devise language which would have that effect, I am extremely doubtful whether the court would allow it to operate so as to defeat section 3. Supposing the vendor included a clause which the purchaser was required to, and did, agree to in some such terms as "notwithstanding any statement of fact included in these particulars the vendor shall be conclusively deemed to have made no representation within the meaning of the Misrepresentation Act 1967," I should have thought that that was only a form of words the intended and actual effect of which was to exclude or restrict liability, and I should not have thought that the courts would have been ready to allow such ingenuity in forms of language to defeat the plain purpose at which section 3 is aimed. I should add that on this part of the case we heard a further argument from Mr Maurice, following Mr Newsom, purporting to draw a distinction between giving information or making a statement of opinion or belief on the one hand, and making a representation on the other. For my part, the distinction seems to be one without a difference. The word "representation" is an extremely wide term; I cannot see why one should not be making a representation when giving information or when stating one’s opinion or belief. To my mind it would be a retrograde step if the court were to give the word "representation," when it appears in the Misrepresentation Act 1967, any narrow or limited construction, less wide than the perfectly natural meaning of the word. I emphasise of course that we are not presently concerned with the issue which will clearly arise at the trial of this action as to whether, to the extent that the footnote relied upon by the first defendant does purport to exclude and restrict the defendants’ liability for any misrepresentation, or to exclude or restrict any remedy otherwise available to the plaintiffs, it would, within the ambit of the exception embodied in the section, in the view of the court trying the matter, be fair and reasonable to allow the defendant, in the circumstances of the case, to rely on the clause for that purpose. I need only add that an alternative argument addressed to the court by Mr Newsom was to the effect that the footnote was not contractual at all; he submitted that, it being no part of the contract, section 3 would not apply to it. For my part I am unable to see how that argument assists Mr Newsom. If the footnote is a term of the contract binding as between the plaintiffs and the first defendant, then it is, for the reasons I have sought to indicate in my judgment, a term which is counter to section 3 of the Act and therefore ineffective, unless the court trying the action thinks it fair and reasonable to give it effect. If it is not part of the contract, then it is not binding on the plaintiffs and it does not help Mr Newsom. For those reasons I would dismiss this appeal. Agreeing, SCARMAN LJ said: I agree in particular with the observations that my Lord made about the submissions put to the court by Mr Maurice, following his leader. Nevertheless, the case for the appellant does have an audacity and a simple logic which I confess I find attractive. It runs thus: a statement is not a representation unless it is also a statement that what is stated is true. If in context a statement contains no assertion, express or implied, that its content is accurate, there is no representation. Ergo, there can be no misrepresentation; ergo, the Misrepresentation Act 1967 cannot apply to it. Humpty Dumpty would have fallen for this argument. If we were to fall for it, the Misrepresentation Act would be dashed to pieces which not all the King’s lawyers could put together again. In this case the contract has been performed. Rescission, the remedy which primarily the plaintiffs (respondents in the appeal) seek, is available only if they can invoke section 1 of the Act. They endeavour to do so by alleging that the tender documents contained a statement which was a misrepresentation; ie approximately 17,900 sq ft said to be available for offices, whereas in truth no more than 14,700 sq ft were available. Mr Newsom QC for the appellants, who, for the purposes of the present application has to base his argument upon the assumption that the allegations in the statement of claim are true, concedes that the tender documents contain the statement; but he submits that a note, or postscript, to the special conditions of sale by tender qualify the statement by removing from it any representation that its content was accurate. According to his argument, the statement went no further than to imply that the defendant believed it to be accurate. In my judgment it is not possible so to read the statement or the note. The statement was a plain representation that under the outline planning consent approximately 17,900 sq ft would be available for offices. The note, fairly construed,83 was a warning to the would-be purchaser to check the facts; that is to say, not to rely on it. Such a warning does not destroy the representation; indeed, it is wholly consistent with the statement being a representation. It is because the statement contains the representation that the warning is given. Since the statement was false, there was a false representation; the Act therefore applies. It follows, therefore, that unless the appellant can establish a defence under section 3 of the Act, he has no defence to the claim under section 1. If the judge be right in thinking that the note became a term of the contract, the appellant may well have a strong case under the section; but that is a question which can only be answered after trial. I would therefore also dismiss the appeal. BUCKLEY LJ agreed with both judgments and did not wish to add anything. The appeal was dismissed with costs, to be taxed and paid forthwith.