McCullagh v Lane Fox & Partners Ltd

Estate agent misstating extent of property to plaintiff purchaser — Purchaser exchanging within two days without survey — Oral and written misstatement regarding property’s extent — Whether vendor’s agent owing duty of care to purchaser for negligent misstatement — Court finding duty of care — Plaintiff not suffering loss through misrepresentation — Whether disclaimer in sales particulars unfair or unreasonable under Unfair Contract Terms Act 1977 — Court of Appeal holding no duty of care on ground that estate agents being entitled to rely on disclaimer in sales particulars — Appeal dismissedThe plaintiff purchased 61 Hartington Road, Chiswick, and claimed that he was induced to enter into the contract by the defendant estate agent’s negligent misrepresentation that the house stood in gardens of 0.91 acre, whereas in reality the area of the entire plot, including the space occupied by the house, was only 0.48 acre. The plaintiff claimed that he would never have paid £875,000 for the property if he had known the truth and that it was not worth more than £550,000. He claimed £325,000 damages. Contracts had been exchanged within two days and no survey was conducted. The sale particulars referred to gardens of “nearly one acre”, but included a disclaimer. The judge held that the defendants owed the plaintiff a duty of care in respect of verbal representations made. However he found that the value of the property lay in the range of £800,000 to £875,000 so that the plaintiff’s purchase was not at a price in excess of its market value. Judgment was entered for the defendants: see [1994] 1 EGLR 48. The plaintiff appealed. The defendants denied liability relying, inter alia, upon the fact that the plaintiff had received a copy of the sale particulars with their disclaimer. Held The appeal was dismissed. 1. The evidence was that it was possible to value the property at £800,000. That was the finding which the judge should have made. It followed that the plaintiff proved damages of £75,000 and, subject to liability, he was entitled to judgment for that sum. 2. The disclaimer implicitly told the recipient of the representation that if he chose to rely upon it he must realise that the maker was not accepting responsibility for the accuracy of the representation. 3. The essence of the law of negligence was the application of objective standards of reasonableness. By those standards it was clear that the defendants were not assuming responsibility for the accuracy of the statement about the acreage. 4. The result was that, having regard to the disclaimer, the plaintiff was not reasonably entitled to believe that the defendants were assuming responsibility for the relevant statement. Therefore, applying the principle in Hedley Byrne & Co Ltd v Heller & Partners [1964] AC 465, they owed him no duty of care in relation to its accuracy unless the Unfair Contract Terms Act 1977 precluded the defendants from using the disclaimer. 5. Under the 1977 Act it was for the defendants to establish that it was fair and reasonable that they should be allowed to rely upon the disclaimer. The use of disclaimers to insulate estate agents and their principals from responsibility for representations made was commonplace. The plaintiff had complete freedom of contract and was in a position to negotiate on an equal footing with the vendor. There was no basis for saying that it would be unfair to the plaintiff to allow the defendants to rely upon the disclaimer nor that it would be unreasonable. Accordingly, the defendants did not owe the plaintiff the alleged duty of care and were not liable. Paul Morgan QC and Anthony Tanney (instructed by Denton Hall) appeared for the plaintiff; Rupert Jackson QC and Richard Lynagh (instructed by Cameron Markby Hewitt) appeared for the defendants.