Scottish Court of Session Decisions

[1] This action came before the Court on procedure roll. The defenders argued their general plea to the relevancy and of no title to sue. The pursuer avers that he, backed by and advised by his parents, purchased a converted shop as a house at 5 Grange Loan, Edinburgh because of the fraudulent misrepresentations of the defenders. The pursuer's parents had been considering whether it would be possible to purchase a suitable flat on behalf of their son, in which he would be able to reside during his period of studies at Edinburgh University. They visited various premises and ultimately on 31 May 1995 the pursuer, his parents and sister visited 5 Grange Loan and were shown round by the first defender. That property had been purchased jointly by the defenders, who had had the old shop there renovated and converted to a dwellinghouse. They obtained building warrant for their works. The first defender, when he showed the house said that he had undertaken and completed the conversion work on the property before it was exposed for sale. A valuation of the property was obtained from Messrs Graham & Sibbald in the sum of £75,000. It was purchased from the defenders for £79,000.

[2] The pursuer avers that the property was advertised for sale and that the selling agents for the defenders, Karus & Co, Solicitors provided particulars inter alia in the following terms:

The pursuer avers that there was also within the subject of sale an area, which he referred to as the "hidden room", which had an entrance hidden by a sealed and freshly painted plasterboard partition at the rear of the said walk-in cupboard. That hidden room was about 20 feet in length and 4 feet wide. There was a sink and connecting pipe-work in that area and a safe. The floor space was later discovered to be almost entirely covered with building debris, plaster, cardboard, and refuse. That area had not been fully renovated, freshly decorated or improved from the time when it had formed part of the basement of the shop premises. The walls were covered with old paint or unplastered.

[3] The pursuer further avers that when the first defender showed him and his family around the subjects, no mention was made of that area and:

[4] The pursuer admits that his solicitors, when concluding missives had made it a condition that the amended building warrant and certificate of completion relative to the premises be produced. He admits that they were produced to his agents about 6 July 1995. His solicitors checked the warrant but did not examine the drawings which accompanied the warrant. The drawings disclosed that there was an area behind the said partition.

[5] The pursuer or his tenants remained in occupation until he arranged to transfer the property to his sister for no consideration by disposition dated 3^rd, submitted for recording on 10^th and recorded on 31 July 1998. The "hidden room" was discovered on 22 July 1998 after dry rot had been identified in the area of the said cupboard. On breaking into the area, it was discovered that it was half full of waste and building materials which were wet and covered in fungus with an appalling smell. There were pipes dripping with condensation, an old sink containing brown stinking water and a safe. Within the waste was found a business card belonging to the first defender and a reading card for the subject of sale addressed to the first defender.

[6] Thereafter, substantial remedial works were carried out but it is admitted by the pursuer that he has not paid for any such works. Those works were paid for by his father. He avers that had his surveyors been aware of the room and its contents, they would have valued the property at £68,000 instead of the £75,000 above mentioned. Accordingly the pursuer bought a house which had been valued at £75,000; when a more accurate valuation would have been £68,000. He claims to have suffered loss thereby. He gave the property to his sister for no consideration despite having contributed to the cost of acquisition, either directly or by renting out rooms to pay the mortgage.

[7] The pursuer's case is that he was induced by the fraud of the defenders and of the first defender acting with the second defender on behalf of the second defender, to purchase at the price he did pay. Had he not been duped into thinking that the property did not extend behind the plasterboard of the walk-in cupboard we would not have paid the price he did. He claims also to have sustained loss measured by the amount expended by his father in repairing representing the value of the damaged state of the property as it became manifest 3 years after purchase.

[8] The defenders attacked the pursuer's title to sue and the relevancy of his averments of loss, his averments of misrepresentation, his averments that any misrepresentation caused loss and the averments relating to dry rot and subsequent damage. Finally, the claim as laid against the second defender was attacked as irrelevant.

[9] The defenders argued that the pursuer had no title to sue because he had given away the property before he was aware of any defect and also that all the renovation work was paid for by his father, a third party. The pursuer had admittedly expended nothing thereon. All expenditure was incurred after the title to the property had been recorded in the name of the pursuer's sister. Any loss was therefore sustained by the pursuer's sister and father. The recent cases on the relevance of damage suffered by some other party, Arthur McAlpine Construction Ltd. v Panatown Ltd. 2000 3 WLR 946 and GUS Property Management Ltd v Littlewoods Mail Order Stores Ltd 1982 S.C. (H.L.) 157 did not assist. They involved different facts and were not cases in which a third party had, paid for repair works, although not obliged to do so.

[10] The pursuer's response was that the whole loss had been sustained when the property was purchased and the damage increased thereafter. It mattered not whether the pursuer knew of the defect because he had been duped into purchasing something he would not have purchased but for the misrepresentations of the defenders. There were two heads of loss, the first being the overpayment and the second, the effect of continuing and increasing damage to the property as a result of the defenders' actions. GUS Property Management was authority for the proposition that these heads of damage could be claimed.

[11] In my opinion, the pursuer has title and interest to sue if he were induced to purchase something he would not have purchased at all or at least, not purchased at the price he did pay, if it is relevantly averred that the purchase was induced by the defenders' fraudulent misrepresentations. The pursuer incurred loss at the date he acquired the property because of the difference in value which then existed. A far greater difficulty for the pursuer, however, is that he paid nothing for any remedial works, did not suffer from any diminution in value when he gave away the property and in relation to that head of damage, personally sustained no loss. The defenders' fraudulent misrepresentations, if they are established, mean on the pursuer's averments that he had acquired a property in July 1995 worth £68,000 if the full facts had not been concealed, not one valued at £75,000. On that basis, any remedial works would have been undertaken and enhanced the value, if the pursuer chose, at that time. The loss which was incurred because of the latent defect of the condition and contents and, also the failure to tank and properly deal with the refurbishment of the "hidden room" falls on the proprietor of the property at the time of that defect being discovered. It should have been discovered or disclosed in 1995 and the value of the property would then have reflected that. (It is averred at £68,000). The pursuer, however, has no interest or title to sue for the cost of remedial works because he had parted with the property, in circumstances where any defect was not material to the passing of the property whether that be expressed as a matter of title or as a matter of relevant averments of damage.

[12] The defenders argued that the averments relating to fraud have to be clear and specific. Drummonds Tr. V Melville (1861). There was no duty to communicate in this case. When selling heritable property the property is open to inspection and nothing has been concealed if it is bought after plans have been disclosed. It is for the pursuer to satisfy himself that the property is what he wishes, and he has had the opportunity to do so. There is no duty to communicate any matter in this case Broatch v Jenkins (1866) 4 M 1030. There is no precedent for damages being due when the fraud or concealment is in relation to heritable property as opposed to moveables such as the jewellery in Paterson v Lansberg and Gibson 7 F 675 and Gibson v National Cash Register Co, 1925 S.C. 500.

[13] The pursuer contended that there was no essential difference between one form of property and another. Each could be sold under a fraudulent misrepresentation as to condition. In any event the pursuer's averments were sufficient to entitle him to an enquiry on the whole matter under reference to the principles which apply when dismissal is sought e.g. Jamieson v Jamieson 1952 S.C. (H.L.) 44. Conduct and words can be sufficient to found an action based on fraudulent misrepresentation. Counsel referred to Erskine; Nicholson edition vol. 2 page 668, Watt v Findlay 5 B 529, and Patterson v Lansberg & Gibson.

[14] I have come to the view that the pursuer's averments of fraudulent misrepresentation, quoted above, at [3] are sufficient to entitle him to enquiry on that matter. It is always a matter of difficulty to determine whether averments are clear and specific enough. In this case, the pursuer's averments as to the actings and statements of the first defender are, on balance, sufficient to set out the fraud averred. In particular, the averments about representations made about "tanking" do appear to be clear and specific and entitle the pursuer to enquiry. If they were made, they might well suffice on their own to set up a case based on fraudulent misrepresentation.

[15] On this matter the defenders' position was much the same as that noted in relation to their argument on title to sue. On the averments they said loss arose, not from any misrepresentation, but from the pursuer's failure to follow through the condition in the missives about obtaining and submitting plans to a surveyor acting for the pursuer. That, if there were fault, would be the fault of the solicitor acting for the pursuer. Even if that were not the case, then the whole plans had been disclosed to the pursuer's agent and thus to the pursuer prior to the contract and therefore the existence of the "hidden room" was apparent and could have been investigated. Had it been investigated, then the consequences of the concealment would have become apparent. Under reference to Strover v Harrington [1988] 1 Ch. 396 it was said that when the documents were received, the solicitor was obliged to communicate them to the pursuer and therefore thereafter there was no concealment. It was for a purchaser to satisfy himself as to the condition of what he purchased.

[16] The pursuer in response pointed to averments about the likely duty of a solicitor in such circumstances, asserting that there was no duty to communicate to the pursuer. In any event examination of the plans was no part of a solicitor's function or capacity.

[17] This aspect of the case caused me some difficulty. There is some force in the defenders' argument that full disclosure had been sufficiently made by the production of the plans. On the other hand, the situation does resemble to some degree the small print on the back of a ticket in an attempt to avoid liability not being noticed. Since I consider that it is arguable that the principal misrepresentation and concealment lay in the fact that the area had not in fact been fully renovated and put in proper order rather than the mere partitioning off of the area, I think this matter also requires proof before determination. The nature and extent of the duty of a solicitor in such circumstances and whether or not the transmission of the plans attached to the building warrant were sufficient to put the pursuer on his guard as to the failure of the defenders properly to deal with the "hidden room" area can only be ascertained after inquiry.

[18] These averments were challenged by the defenders because it was said that the pursuer was not relying on representations about dry rot or dampness but on a guarantee provided by a third party. The effect of that went also to the loss averments in Condescendence 5.

[19] The pursuer's response was that these averments were related to the loss and damage which had been occasioned by the defenders' actings in concealing the room and its condition.

[20] I did not feel able to delete these averments from the Record since they formed part of the narrative of events showing the seriousness of the concealment made by the first defender at the time of sale. If the true condition of the concealed area was such as to cause the subsequent events the more serious was the extent of the misrepresentation about the condition of the house made to the pursuer at the time of sale. However, the matter of damage to the property caused by the development of dry rot and dampness is, in my view, not a relevant subject of claim because the resultant loss was not sustained by the pursuer but incurred by someone else. Whatever might have been the position had the pursuer remained in occupation and discovered the dry rot, the circumstances which now exist are that that defect was passed on by the conveyance. The pursuer himself has sustained no loss. It is not suggested that he is liable to his successor for the consequences of the defect and there are no assignations.

[21] I should add at this point that the pursuer's counsel was invited to consider whether the true situation in the present circumstances was that there had been a family venture by the pursuer's parents to purchase and provide accommodation for each of their children. It is the pursuer's parents who having actually financed and provided the accommodation not solely for the pursuer, but for subsequent occupation by each of the children have suffered the losses. Counsel felt unable so to alter his position although it might have brought the claim more firmly within the dicta in GUS Property Management. There may well, of course, have been taxation consequences for them had matters been arranged in any other way by the pursuer's parents at the time of purchase.

[22] It was asserted that there were no relevant claims against the second defender. All the representations and the particulars derived from the first and it was plain from the missives that Messrs Karus & Co had one client, the first defender. The only relevance of the second defender was that he was the joint title holder.

[23] Counsel for the pursuer made various amendments both before and during the debate, designed to draw in the second defender as part and parcel of the representations. On any view, he said this was a joint enterprise between the two defenders, the owners of property purchased for renovation and then sold on. The second defender was equally bound by the actings with the first defender as they would be had they been his own.

[24] The matter of the involvement and liability of the second defender requires to remain for proof. I note that counsel for the defenders felt able to argue that one of the defenders was not liable jointly with the other but that the first defender would be liable for the entire damages should the pursuer prove his case. This is, I consider, very close to a conflict of interest situation in which the case defenders should be separately represented. In any event, I think that the pursuer has sufficiently averred that both defenders were involved jointly in the whole enterprise of purchase, renovation and sale of the property and accordingly, each would be liable for the actings of the other. I decline therefore to accede to the motion that the action be dismissed against the second defender.

[25] The pursuer is entitled to a proof before answer in respect of all his averments with the exception of the averments which even after the deletions made at the bar of averments at page 23C-D, still remain the losses of someone other than himself. I shall accordingly refuse to remit to probation the averments from, "1998" at 22A to "thereby" at 23D of the Closed Record and quoad ultra allow a proof before answer.