Johnson and another v Bournemouth Borough Council

Lease — Assignment of short-term lease — Long-term intention to seek purchase of freehold reversion — Formal and information inquiries prior to purchase — Concern over highway construction affecting property — Alleged failure by local authority to indicate long-term intentions — Claims for breach of contract and negligence — Whether local authority liable in damages — Whether long-term development plans material to claims — Appeal by local authority allowedBy letter dated November 29, 1982, the plaintiffs agreed subject to contract to purchase the lease, goodwill, fixtures and fittings of an hotel called the “London Hotel” at 47 Lansdowne Road, Bournemouth. The lease was held by C from Dorset County Council at an annual rent of £5,000 with full repairing covenants. The lease had a little under three years to run, but had an option to renew for a further period of seven years nine months expiring on December 31 1991. The purchase price was £27,500 plus stock at valuation. Following their entering the agreement to buy the lease the plaintiffs, either personally or through their solicitors, made inquiries of the council as to whether there were any proposals or schemes for construction of any new roads or alterations to existing roads which would affect the property. Among other things their solicitors sent a form of inquiry “Con 29A”. The form was approved by the Law Society, the Association of County Councils, the Association of District Councils and the Association of Metropolitan Authorities. It recited that under arrangements made between the district council and the county council the replies, where appropriate, covered knowledge and actions of both councils. That was important in the present case, since the borough council were the delegating authority and the county council were the highway authority. The answers to the form of inquiry included a general reference to the non-statutory document by the borough entitled Bournemouth Town Centre Policy Statement (BTCPS), which indicated that the council had long-term plans affecting the property. Those plans were expected to be carried out after the turn of the century. When the plaintiffs visited the council offices to inquire further, they were assured that there was no development planned which would affect the property in any way. Therefore, they proceeded with the acquisition of the lease. In their inquiries before purchase the plaintiffs made no inspection of the state of the premises, nor did they consider the repairing obligations under the lease of which they were to take assignment. It was not even clear that they had found out who the landlord was. The result was that they acquired considerable outstanding repairing obligations which had been incurred by C, the liability for which now fell upon the plaintiffs. In May 1983 the county council consented to grant an option for seven years and nine months and in August 1983 the plaintiffs gave notice of intention to exercise that option. However, the council in March 1984 refused to complete the option until arrears under the existing lease had been cleared. By late spring 1985 the hotel business was not prospering and cash-flow difficulties were making it difficult for the plaintiffs to pay the rent due under the lease. At this point the plaintiffs mentioned the possibility of acquiring the freehold of the property. When they discovered the long-term plans for development which would affect the property they said that if they had been told that there were plans for future development when they were negotiating the purchase of the assignment of the lease, they would not have proceeded with the purchase. They brought proceedings claiming damages for negligence or, alternatively, breach of contract on the part of the council arising out of the answers given by representatives of the council in oral exchanges or written answers upon the inquiry form which had been submitted by the plaintiffs for responses by the council. Judge Bates, sitting as a High Court judge on March 22 1991, awarded damages in the sum of £75,000 together with interest. The council appealed. Held The appeal was allowed. 1. The plaintiffs were content to buy a comparatively short lease of seven years and nine months on the existing lease with an expiry date of December 31 1991. If they had had long-term intentions beyond that date, it was difficult to see why, at that stage, they did not make inquiries of the county council as to the possible acquisition of the reversion. Had they done so they would have immediately been given an answer. It was not until much later that the plaintiffs finally posed the direct question to the county council. The inquiries before contract addressed by the plaintiffs’ solicitors to C’s solicitors only made reference to the landlords in relation to their willingness to grant a new lease and whether they had given their consent to the proposed assignment. No inquiries were directed to the willingness of the landlord to entertain an offer for the reversion nor were any inquiries addressed directly to the county council on that point. The long-term plans for the development fell far beyond the term envisaged in the lease and the option to extend which the plaintiffs had in mind when their inquiries were made. 2. Inquiry 2(C) in form 29A asked whether the council had approved or been notified by the Secretary of State of any proposals for highway construction or improvement that involved the acquisition of the property. The operations there referred to were the construction or improvement of a specific highway, a proposal for which would involve the acquisition of the property. The BTCPS was not such a highway proposal or plan and therefore did not fall within inquiry 2(C). 3. Inquiry 2(D) referred specifically to proposals for public construction of a new road indicating a possible route the centre line of which would be likely to be within 200 m of the property. There again the proposals were referring to a new road construction in contemplation in the form of specific proposals. That was a long way from the general indication and not specific proposals. Reference, therefore, in the non-statutory BTCPS would not amount to a proposal which would fall within inquiry 2(D). 4. Further, the answers to inquiry 7(B), (C) and (D) were adequate and did not amount to a reason for imposing liability on the borough council. In particular the answer to inquiry 7(D) clearly alerted the plaintiffs’ solicitor to the necessity of making further inquiries about the BTCPS. 5. There was no evidence that there was any duty on the borough council’s officer when the plaintiffs visited their offices to refer to the highway authority or go outside the immediate planning position, which showed the site in question as a residential area through which a principal traffic route passed. 6. On the facts and evidence before the court no liability rested on the borough council in respect of either answers to form 29A or the information given on visits to the county borough offices when the plaintiffs failed to make reference to the previous formal inquiries in writing on form 29A; or to any specific long-term plans they had in respect of the property. Dermod O’Brien QC and Brian Leech (instructed by Wood Awdry Wansboroughs, of Devizes) appeared for the appellant council; and Stephen Lloyd (instructed by Heald Nickinson, of Camberley) appeared for the respondent plaintiffs.