Pankhania and another v Hackney London Borough Council and another
Mr Rex Tedd QC, sitting as a deputy judge of the division
Sale of freehold by auction — Particulars stating that site occupied by car park company under licence — Vendors’ agent aware that occupier likely to make successful claim to tenancy protected by Landlord and Tenant Act 1954 — Purchaser failing to evict occupier — Purchaser claiming damages under section 2(1) of Misrepresentation Act 1967 — Whether Act applicable to misrepresentations of law — Alternative claim under section 2(2) for damages in lieu of rescission — Whether permissible where remedy of rescission not available — Primary claim allowed
The first defendant council were the freehold owners of a site that, at all material times, had been used as a car park. By an exchange of letters in or around August 1988, the council allowed National Car Parks Ltd (NCP) to occupy the site “on a temporary licence basis” for a period of one year, in return for a “fee” based upon parking receipts. By variations agreed in 1989 and 1991, the licence was renewed on a monthly basis, subject to the right of either party to terminate on the giving of three months’ notice*.
In early 1999, the council, having decided to sell the site by auction, instructed NB to work with solicitor BDB in preparing, inter alia, the auction catalogue. During the course of that year, NB and BDB reached the view that NCP was likely to claim that it occupied under a tenancy protected by the Landlord and Tenant Act 1954, and that, if it did so, it was likely to succeed. As finally drafted, the auction catalogue stated, under a highlighted heading “Licence to NCP Car Parks”, that the entire site was “let to NCP on a monthly licence from 1 March 1989”. By certain provisions of the particulars of sale (the deeming provisions), purchasers were deemed to have bought on the basis that: (i) they had taken the required professional advice; (ii) they had not acted in reliance upon any representations made by, or on behalf of, the council; (iii) they had full knowledge of the state and condition of the property; and (iv) neither the council nor NB were obliged to disclose any matter, whether known to them or not.
Sale of freehold by auction — Particulars stating that site occupied by car park company under licence — Vendors’ agent aware that occupier likely to make successful claim to tenancy protected by Landlord and Tenant Act 1954 — Purchaser failing to evict occupier — Purchaser claiming damages under section 2(1) of Misrepresentation Act 1967 — Whether Act applicable to misrepresentations of law — Alternative claim under section 2(2) for damages in lieu of rescission — Whether permissible where remedy of rescission not available — Primary claim allowed
The first defendant council were the freehold owners of a site that, at all material times, had been used as a car park. By an exchange of letters in or around August 1988, the council allowed National Car Parks Ltd (NCP) to occupy the site “on a temporary licence basis” for a period of one year, in return for a “fee” based upon parking receipts. By variations agreed in 1989 and 1991, the licence was renewed on a monthly basis, subject to the right of either party to terminate on the giving of three months’ notice*.
In early 1999, the council, having decided to sell the site by auction, instructed NB to work with solicitor BDB in preparing, inter alia, the auction catalogue. During the course of that year, NB and BDB reached the view that NCP was likely to claim that it occupied under a tenancy protected by the Landlord and Tenant Act 1954, and that, if it did so, it was likely to succeed. As finally drafted, the auction catalogue stated, under a highlighted heading “Licence to NCP Car Parks”, that the entire site was “let to NCP on a monthly licence from 1 March 1989”. By certain provisions of the particulars of sale (the deeming provisions), purchasers were deemed to have bought on the basis that: (i) they had taken the required professional advice; (ii) they had not acted in reliance upon any representations made by, or on behalf of, the council; (iii) they had full knowledge of the state and condition of the property; and (iv) neither the council nor NB were obliged to disclose any matter, whether known to them or not.
At an auction held on 8 November 1999, the site was sold to the claimants for £3.925m, for the purposes of residential development. The claimants served a notice to quit on NPC, which rejected it on the ground that its tenancy was protected by the 1954 Act. In proceedings brought by the claimants against the council, it was common ground that any claim to rescission had been lost. The primary claim was for damages under section 2(1) of the Misrepresentation Act 1967, the claimants alleging that their purchase had been induced by the council’s misrepresentation of NPC’s status. An alternative claim, under section 2(2) of the Act, was made for damages in lieu of rescission. At a hearing on liability only, the council contended, inter alia, that no action lay because the alleged misrepresentation went solely to matters of law (the main defence).
Held: The primary claim was allowed .
1. Applying the law as declared by the House of Lords in Street v Mountford [1985] 1 EGLR 128, AG Securities v Vaughan [1988] 2 EGLR 78 and Bruton v London & Quadrant Housing Trust [1999] 2 EGLR 59, the 1988 agreement plainly created a tenancy, notwithstanding the terminology employed: Hinks v Fleet [1986] 2 EGLR 243 distinguished.
2. The argument underlying the main defence could not be reconciled with the reasoning of the House of Lords in Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349, which allowed for the recovery of moneys paid under a mistake of law. The council’s argument, like the one rejected in Kleinwort, rested upon what was seen to be a dubious extension of ignorantia juris non excusat: see Chitty on Contracts (28th ed) 6-011. In any event, the “misrepresentation of law” rule, as earlier applied, would not have assisted the council, since the catalogue impliedly represented that the council knew (through their agent) of facts that justified the terminology used: Rogers v Ingham (1876) 3 Ch D 351, André et Cie SA v Établissements Michel Blanc et Fils [1979] 2 Lloyd’s Rep 427 and Atlantic Lines & Navigation Co Inc v Hallam Ltd (The Lucy) [1983] 1 Lloyds Rep 188 considered.
3. The majority of the deeming provisions relied upon by the council could operate, if at all, only as an estoppel: see Lowe v Lombank Ltd [1960] 1 WLR 196. No such estoppel could be made out, because the claimants had made no representation upon which the council had acted to their detriment. Further, given the importance of the misrepresentation, and the fact that it had been deliberately made by the council’s agent, the effect of the same provisions was negated by section 3 of the 1967 Act, as substituted by section 8(1) of the Unfair Contract Terms Act 1977. The provisions plainly failed to meet the requirement of reasonableness laid down in section 11 of the 1977 Act.
4. The success of the primary claim made it unnecessary to decide whether a damages claim under section 2(2) of the 1967 Act was ruled out where the remedy of rescission was not available: cf the opposing opinions expressed in Zanzibar v British Aerospace (Lancaster House) Ltd [2000] 1 WLR 2333 (excluding the remedy), and Thomas Witter Ltd v TBP Industries Ltd [1996] 2 All ER 573. In the view of the court, such a claim should fail.
* Editor’s note: The agreement did not explicitly address the question of possession: cf National Car Parks Ltd v Trinity Development Co (Banbury) Ltd [2001] EWCA Civ 1686; (2002) P&CR 18 (not cited in the present judgment).
Editor’s note: A further claim alleging a misrepresentation of the council’s planning policies was dismissed for want of evidence.
Stephen Jourdan (instructed by Kenneth Cunningham & Co) appeared for the claimants; David Christie (instructed by Browne Jacobson) appeared for the first defendants; the second defendant did not appear and was not represented.
Alan Cooklin, barrister
