England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON CIVIL JUSTICE CENTRE
(HIS HONOUR JUDGE BAILEY)

		Royal Courts of Justice Strand, London, WC2A 2LL
		31st January 2013

Lord Justice Beatson:

1. This appeal is from an order dated 16 December 2011 by HHJ Bailey in the Central London County Court following a trial of liability only in an action brought by a purchaser of property in a village in Gloucestershire against his vendor for misrepresentation. The claimant, Mr Vahey, a city dweller who wished to purchase a country retreat, claimed that the defendant, Mr Kenyon, had through his solicitors made representations that the property had not been affected by flooding and that he purchased the property in reliance on those representations and also claimed that there were oral representations by Mr Kenyon. The judge found that the defendant vendor was liable in deceit and that the claimant, the purchaser, was entitled to damages to be assessed.
2. When giving permission to appeal Aikens LJ stated that there was an arguable ground based on two points. The first was that it was arguable that the judge made a finding of fact that, had the purchaser been told the truth about the flooding, he would probably have continued in any event to purchase the property. The second, which only arises if the judge did so find, is whether, where it is proved that a misrepresentation has been made deliberately or recklessly, and did induce the representee to enter the contract but it is also demonstrated that the representee would have entered into the contract even if he had been told the truth, it could be said that the misrepresentation caused any loss to the representee.
3. Mr Curtis QC, on behalf of the appellant vendor, (who did not appear below) submitted that since the judgment below found, or should have found, that the purchaser would probably have been content to buy the property had he been told the truth about the flooding, the misrepresentation did not cause any loss to the representee purchaser. He submitted that it followed that the judge should have dismissed the purchaser's claim.
4. The factual background is set out in the judge below's careful and well structured extemporary judgment. It can be summarised very briefly. The buyer's searches showed that the property was close to a fluvial flood plain and as a result on 1 October 2002 his solicitors asked:

"Has the property ever been affected by flooding?"

The reply stated:

"Our client has no knowledge of the property having been flooded, save that it is common knowledge in the locality that some 30 years or so years ago the wall (or whatever) of a local farmer's private reservoir broke, causing local flooding -- the reservoir no longer exists."

5. Soon afterwards the buyer's surveyor prepared a report which referred to a stream running down a wooded valley forming part of the property, dampness to the walls of the ground floor and the presence of a relatively new sump and sandbags together with marked erosion around the stream. This led the purchaser's solicitors to return to the question of flooding. In a letter dated 17 October they asked:

"Has any of the property or its grounds been affected by flooding at any time?"

6. The solicitor replied, stating as to flooding that the vendor could not add anything to what he had already said:

"…but, so as to avoid any misunderstanding, he has asked us to point out that the stream has occasionally burst its banks, but not to any significant degree."

7. The judge stated (see paragraph 42 of the judgment) that it was plain that the purchaser was concerned about flooding. There was also evidence about a visit on 3 November 2002 by the purchaser with his partner and her brother who had some surveying experience. The vendor's evidence (see judgment paragraph 45) was that he had said "there had been a hairy moment in 2000 when large quantities of water had flowed past the back of the house" but that he had confirmed in response to a question from the purchaser that they had not had flooding in the house.
8. The parties then proceeded to negotiate a reduction in the price of £10,000, to exchange contracts on 22 November, and to complete the transaction on 4 December 2002.
9. Soon afterwards, heavy rain caused water levels to rise and enter the house. As a result of this, the purchaser made inquiries of other local residents and was told that there had been a previous flood at some time between September and early November 2000 when a similar amount of flood water had descended on the property. The purchaser's pleaded case was that the flooding was so serious that the fire brigade had to be called and extensive damage was caused to the house (see Particulars of Claim paragraph 15(ii)). The judge found (paragraph 20) that there was no basis for finding that the fire brigade attended. I will return to this below. He also rejected the pleaded case as to the extent of the damage to the house.
10. The material parts of paragraph 35 of Mr Vahey's first statement are:

"35. I am also clear that if the true extent of the flooding history of this property had been disclosed in response to the questions put to the defendant before I exchanged contracts, it would have completely destroyed my interest in progressing the purchase. …I realise that, with hindsight, it is easy for me to say that I definitely would not have proceeded with the purchase. I have asked myself that, if I had seen photographs of the damage, and if I had known of the extent of the damage caused to the property previously, what would I have done? I believe that I would have asked a specialist company, like Civation Ltd to provide me with a quotation of costs to minimise the risk of flooding at the property. I now know to virtually the eliminate the risk, which is the only basis on which I could have perceived proceeding with this purchase, it would have cost probably in excess of £50,000. However, apart from the fact that I would not have been able to afford £50,000 at that stage, I would also have had to take into account the diminution or devaluation of the property as a consequence of it having a flooding risk, even if a huge dam was built to limit the possibility of that risk recurring. It is clear to me that, even if I had gone ahead, I would have had difficulty selling this property because any prospective purchaser would be put off by seeing dams at the rear of the property which clearly represent the possibility of a flood risk to any purchaser. In all of those circumstances, I honestly believe that I would not have proceeded with the purchase, and would have looked around for an alternative property that represented no similar risk for a similar amount of money in a similar location that I could have been happy in, and where I could have enjoyed a full night's sleep!"

11. As to the November 2000 flood the judge found (see judgment paragraph 37):

"A very great deal of water passed from the back through to the front of the garage with [an inch to an inch and a half] of water ran through the garage for a number of hours, amounting to an appreciable quantity of water passing on down the hill towards the lower properties and that, in addition to this water passing through the garage, a quantity of water more than, but not appreciably more than, a litre did in fact overtop the threshold and enter into the living area of the property."

12. He had previously found that a claim of £48 for cleaning the carpets was made to the vendor's insurers. It would appear that this may in fact have been the insurer's call out fee. He also found (see paragraph 38) that the vendor "was well aware that there had been the significant flooding incident". He stated that the vendor accepted that he did not tell his solicitor that water had flowed through the garage or seeped under the window. He found that the written statements made on behalf of the vendor during the course of the conveyancing "presented a wholly misleading picture of the history of the flooding at the property and consequently the risk that the property faced as to flooding in the future" (see paragraph 40). This was accepted in cross examination of the vendor.
13. He then dealt with the oral representations and admissions. The judge then stated:

"46. It seems to me that, in explaining large quantities of water flowing past the back of the house, Mr Kenyon simply was not doing enough to put right the undoubtedly misleading information that had been given in writing by his solicitors. …

47. My view is quite simply this. Where a vendor of land knows that the purchaser is concerned about flooding and either knows or must be taken to know that his solicitors have, in writing, given a wholly misleading picture of the past position to say 'Yes' in answer to a question 'but I can tell them that you haven't had the flooding in the house', when what you are really saying to yourself is 'well, there has been a bit of water in the house, but it is not flooding properly defined', simply cannot amount to a fair and accurate description of the position. I do not like putting it in terms of deceit. Deceit comes in so many different forms, and with such different degrees of culpability, but, insofar as deceit includes recklessly giving a misleading position, then I have no alternative but to find, on his own statement, that Mr Kenyon has been guilty of deceit.

48. …[Mr Kenyon] was a man being careful to be literally true as far as he possibly could, even though it was evident to himself that he knew that in reality Mr Vahey had been deceived in this respect. It is such a shame, because it may well be that, had he explained carefully and methodically the position that the house had been in, the steps that had been taken to ensure that it could not happen, and the need to keep the upper culvet clear, Mr Vahey might yet have been assuaged in his concerns and proceeded with the purchase. …[After accepting that Mr Vahey had not been shown how water had cascaded down and flooded the patio, or that the grille had to be kept clear to prevent flooding, the judge continued] …That is not to say that I accept that there was necessarily no reference to hairy moments or difficulties with water, but that whatever it was that Mr Kenyon said to Mr Vahey, it was carefully formulated and did not alert Mr Vahey to the fact that there had been water penetration to the garage and house, or otherwise alert him to the fact that the answers to enquiries presented a misleading picture. Mr Vahey came away from his meeting with Mr Kenyon reassured that there had not been, and was not, a flood problem, and the reasonable bystander would not have drawn a different conclusion from what was said.

49. I have to consider whether Mr Vahey relied on the misrepresentation which I have found to have been made by the defendant. I have no doubt that Mr Vahey did rely on that misrepresentation. … Not only do I accept his evidence in this respect, but the whole tenor of the conveyancing transaction leading up to 3 November and right through to the exchange of contracts on 22 November shows that this was a matter of considerable importance to him. …"

14. The premise upon which permission was given, and on which this appeal proceeds, is that the judge found that the purchaser would probably have continued in any event to purchase the property, or alternatively that, in the light of the evidence, this was the only finding properly open to the judge. At the core of this submission is the consequence of what the purchaser, Mr Vahey, stated in paragraph 35 of his statement.
15. Mr Curtis's submission was that in the light of that paragraph the rejection of the purchaser's pleaded case as to the extent of the damage and that the fact that the issue of whether the purchase would have proceeded was a live issue. It was referred to in closing submissions by Mr Stevenson QC and a finding that the purchaser would probably have bought the house anyway and for the same price was inevitable. That, he argued, is the true meaning of paragraph 48 of the judgment. If, however, it was not, the judge's failure to make the finding constituted an appealable error.
16. I do not consider that the judge did find that the purchaser would probably have bought the property anyway. That is not what he stated in paragraph 48. All he said was "it may well have been" that the purchaser "might" have been assuaged. The judge certainly did not make a finding that the purchaser would have bought the property on the same terms. Against a background in which he had negotiated a reduction in the price, the indication is that he would have sought to negotiate a further reduction.
17. A finding of the sort that Mr Curtis submits was made would have been inconsistent with the purchaser's evidence, and at that stage of the judgment the judge had made no comment about that evidence. Paragraph 35 of the purchaser's witness statement commenced:

"…if the true extent of the flooding history of this property had been disclosed … it would have completely destroyed my interest in progressing the purchase."

The purchaser had not been cross-examined on that matter.

18. In those circumstances it is inconceivable that the judge would have made a finding on the point without considering and commenting on the purchaser's evidence. Moreover, in the light of the fact that the evidence was unchallenged the judge was entitled not to make the finding upon which this appeal depends.
19. Since the representation made by the vendor was undoubtedly material, it would be for him to show that the purchaser was not induced by it to enter into the transaction, and he had not done this. The judge expressly found in paragraphs 48 and 49 that the purchaser did rely on the misrepresentation. The fact that the judge considered that the claimant "might" have proceeded had he been given a full and accurate account neither detracts from the finding of reliance nor amounts to a finding that the purchaser "would" have proceeded.
20. It follows that the question of law raised in the second point upon which permission was granted does not in fact arise. In these circumstances I do not consider it necessary to deal with it and indeed we have not heard argument on it because Mr Curtis accepted at the outset of his submissions that the two grounds of appeal are cumulative and he needed to succeed in both.
21. Accordingly, I would dismiss this appeal

Lord Justice Lewison :

22. As Beatson LJ has explained, the judge found that there had been a significant flooding incident in the year 2000 about which Mr Vahey was not told, albeit it was not quite as bad as Mr Vahey subsequently came to believe. The judge also found that the question of flooding was of considerable significance to Mr Vahey and it is not therefore surprising that the judge found that Mr Vahey was induced to enter into the contract by the replies that he received in relation to the flooding.
23. Against that background, the judge's observation in paragraph 48 of his judgment, that it may well be that had Mr Vahey been told the truth he might have proceeded, cannot fairly be read as a positive finding that he would have proceeded at the same price. Coupled with the judge's acceptance of Mr Vahey's evidence, although not about the extent of an historic flooding incident, the judge's observation was no more than speculation (inaudible) comment. I therefore agree for the reasons given by Beatson LJ this appeal must be dismissed.

Lord Justice Mummery:

24. I agree with both judgments. The appeal is therefore dismissed.

Order: Appeal dismissed