ON APPEAL FROM CENTRAL LONDON COUNTY COURT
His Honour Judge Dight
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE LONGMORE
LORD JUSTICE ETHERTON
| CLEAVER & ORS
|- and -
|SCHYDE INVESTMENTS LIMITED
WordWave International Limited
A Merrill Communications Company
190 Fleet Street, London EC4A 2AG
Tel No: 020 7404 1400, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr Tom Leech QC and Ms Philomena Harrison (instructed by W Davies & Son) for the Respondent
Hearing dates : Tuesday 12th July 2011
Crown Copyright ©
Lord Justice Etherton :
Condition 7 of the Standard Conditions
7.1 Errors and omissions
7.1.1 If any plan or statement in the contract, or in the negotiations leading to it, is or was misleading or inaccurate due to an error or omission, the remedies available are as follows.
7.1.2 When there is a material difference between the description or value of the property, or any of the chattels included in the contract, as represented and as it is, the buyer is entitled to damages.
7.1.3 An error or omission only entitles the buyer to rescind the contract:
(a) where it results from fraud or recklessness, or
(b) where he would be obliged, to his prejudice, to accept property differing substantially (in quantity, quality or tenure) from what the error or omission had led him to expect."
The statutory provisions
"3 Avoidance of provision excluding liability for misrepresentation
If a contract contains a term 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 term shall be of no effect except in so far as it satisfies the requirement of reasonableness as stated in section 11(1) of the Unfair Contract Terms Act 1977; and it is for those claiming that the term satisfies that requirement to show that it does."
"11 The "reasonableness" test
(1) In relation to a contract term, the requirement of reasonableness for the purposes of … section 3 of the Misrepresentation Act 1967 … is that the term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made."
"The seller confirms that pending exchange of contract or where there is no prior contract pending completion of a transaction, it will notify the buyer on becoming aware of anything which may cause any reply that it has given to these or any such supplemental enquiries to be incorrect."
"Please supply a copy of any planning permission, proof of reserved matters, building regulations approval, building regulations completion certificate, listed building consent and conservation area consent which relates to the property and of any consent to the display of advertisements at or from the property (each a consent)"
"Please provide details of any application for a consent order certificate which: (a) has been made but not yet decided; (b) has been refused or withdrawn; or (c) is the subject of an outstanding appeal."
"Please supply a copy of any letter or notice under planning legislation which has been given or received in relation to the property."
"12. It is hereby agreed and declared that this Agreement includes the entire terms of the agreement for sale and purchase of the Property and that no warranty or statement whether oral or implied made by or on behalf of the Seller shall be capable of being treated as forming part of the said terms or as an inducement by the Seller to the Buyer to enter into this Agreement or as a warranty in relation to the subject matter thereof or be grounds upon which the Buyer shall base any claim against the Seller save that this clause shall not apply to written replies given by the Seller's Solicitors to the Buyer's Solicitors written pre-contract enquiries and written information contained in Commercial Property Standard Enquiries Forms … supplied by the Seller's Solicitors to the Buyer's Solicitors."
 It seems to me that the key is, as Mr Johns [counsel for the Claimants] suggests, that these replies were made in writing in the knowledge that the replies were intended to be relied upon. The nature of the information which was not revealed was, as I have already held, highly material so far as the Claimants were concerned and went to the wisdom and merits of their proposed development of the property.
 The Defendants, I find, must have known about the importance of the planning position to the purchasers and that is reflected not only in the evidence that Mr Cleaver gave but more particularly in the evidence given by his solicitor, in the attendance notes recording Mr Cleaver's concerns and in the correspondence with Dr Watts in which there was an attempt to buy off Dr Watts' concerns.
 Significantly also, in my judgement, is the fact that there was a continuing obligation to correct enquiries if they were known to be incorrect. The information came to Mr Cleaver two days after the replies were given to the enquiries at a time when the advice of Mr Solomon and the terms of the enquiries must have been fresh in Mr Cleaver's mind."
"1) he says that the Defendants made a representation which had become false and that they knew about it as did their solicitors. He therefore challenges whether or not the misrepresentation as at the exchange of contract was wholly innocent;
2) in distinction to Gotham v Couteau and the FoodCo case the answer was made as part of the formal enquiry process in writing which the authorities treat, he submits, as a key factor;
3) there was a specific provision, to be found in paragraph F of the introduction to the enquiries before contract, that if the replies to the enquiries were untrue, they would be corrected. He points out that the Defendants did precisely what they confirmed they would not do by not correcting the reply which had become untrue.
4) the contract expressly contemplated reliance on the pre-contract enquiries, in which respect Mr Johns relied on clause 12 of the contract, and says this is reflected in the advice which Mr Solomon gave Mr Cleaver in the letter advising Mr Cleaver as to how to approach the answers to the enquiries that were raised;
5) the Defendants knew of the importance of the replies generally and of this one in particular;
6) the Defendants knew that Dr Watts' application would matter to a purchaser. He refers again to Mr Cleaver's evidence to the effect that he knew that it would matter;
7) there was not really a separate negotiation of the standard conditions and in particular this exclusion provision. They were, save in one respect, standard variations which solicitors tend to adopt as their "pet", my word not his, variations."
"128. The fact that both parties were represented by solicitors does not seem to me to outweigh that [viz. that Special Condition 7.1.3 was not fair and reasonable]. It is apparent that the clause was not separately negotiated but it is difficult to envisage how it might have been separately negotiated to cater for what actually took place in this case."
"It may, therefore, be appropriate to consider how an original decision as to what is "fair and reasonable" made in the application of any of these provisions should be approached by an appellate court. It would not be accurate to describe such a decision as an exercise of discretion. But a decision under any of the provisions referred to will have this in common with the exercise of a discretion, that, in having regard to the various matters to which … section 11 of the Act of 1977 direct[s] attention, the court must entertain a whole range of considerations, put them on the scales on one side or the other and decide at the end of the day on which side the balance comes down. There will sometimes be room for a legitimate difference of judicial opinion as to what the answer should be, where it will be impossible to say that one view is demonstrably wrong and the other demonstrably right. It must follow, in my view, that, when asked to review such a decision on appeal, the appellate court should treat the original decision with the utmost respect and refrain from interference with it unless satisfied that it proceeded on some erroneous principle or was plainly and obviously wrong."
"9. First, so far as this Court is concerned, while the hearing of this appeal is in the form of a re-hearing and the Court is entitled to reach its own view of the evidence, its approach is constrained by a natural reluctance to disturb a first instance decision as to what is reasonable in all the circumstances of a particular case, bearing in mind that views on reasonableness may properly differ and that, in any matter where the decision depends not merely on argument but also on the effect of oral evidence, the first instance Judge has the advantage of hearing such evidence at first hand."
"It seems to me that the equitable barrier to specific performance extends not merely to matters of title where the vendor has failed to disclose defects known to him in his own title, but also to misrepresentation where the vendor has, albeit innocently, misdescribed the property or made some other misrepresentation about the property, when the true facts were within his own knowledge. A trifling misrepresentation where the truth would have had no effect on the purchaser and the purchaser would have nonetheless entered into the contract, rests in a different category because there the contract has not been induced by the misrepresentation, but here, as I find, the purchaser would reasonably have refused to contract unless the boundary dispute, if disclosed to him, had first been resolved. Therefore, it seems to me that on equitable principles and consistently with the authorities I have mentioned, and consistently also with the fairly recent decision of Walton J in Faruqi v English Real Estates Ltd  1 WLR 963, the vendor, Mrs Boyle, is not entitled in equity to rely on condition 17 in the circumstances of this case."
"If condition 17 has any validity or relevance in the circumstances of this case, it is a term which would exclude liabilities to which Mrs Boyle would be subject by reason of misrepresentation, and so section 3 is applicable. The requirement of reasonableness in section 11 of the Unfair Contract Terms Act 1977 is that the term shall have been a fair and reasonable one to be included, having regard to the circumstances which were or ought reasonably to have been known to or in the contemplation of the parties when the contract was made. I do not regard condition 17 as satisfying that requirement in the circumstance of this case. Another way of putting it is that Mrs Boyle has not shown that it does satisfy that requirement."
"(i) The aspiration of certainty is a reasonable one for the parties to adopt. In most cases it will have the effect of avoiding a twelve day trial such as this one.
(ii) There was no substantial imbalance of bargaining power between the parties. Each of the tenants was a commercial and substantial concern ...
(iii) Each of the tenants was advised by solicitors …
(iv) The term itself was open to negotiation …
(v) Perhaps most importantly, the clause expressly permitted reliance on any reply given by the Henry Boot's solicitors to the tenant's solicitors. If, therefore, something of importance had been stated in the course of negotiations upon which the intending tenant wished to rely, its solicitors had only to ask Henry Boot's solicitors for an answer to a question. That would have revealed whether Henry Boot was prepared to formalise the statement so that the tenant could rely on it or whether the tenant would have to undertake its own due diligence."
Lord Justice Longmore
Lord Justice Laws