William Sindall Plc V. Cambridgeshire County Council Essay, Research Paper

This case concerns a property sale that was rescinded at the court of first instance, on grounds of misrepresentation. The vendor is appealing against that decision, claiming that the purchaser has no remedy, and that if there is a remedy it should be restricted to damages. The purchaser, William Sindall plc, bought the land in question, an area of school playing fields, in December 1989, with a view to property development. The purchase was made at the height of a property boom, and the price paid was in excess of five million pounds. The development immediately ran into problems concerning planning permission, which took eighteen months to resolve. By that time the property market, and the value of the land, had collapsed. As plans for development began to progress it was discovered that a sewer ran diagonally across the land, and required that a six metre maintainance strip be left vacant above it. Sindall’s solicitors then wrote to the council rescinding the contract on the grounds of various misrepresentations, and common fundamental mistake. How does the law of common mistake apply to these facts? Atiyah (1989) sets out two conditions that are required for a contract to be held inoperative on these grounds. Firstly the mistake should be ’sufficiently fundamental or basic to invalidate a contract’, and secondly the mistake must not be ‘the responsibility of one or other of the parties’. In my opinion neither of these requirements are satisfied in this case. The test of fundamentality was established in Bell v. Lever Bros. [1932] AC 161, in which Lord Atkin states that the mistake must relate, “to the existence of some quality which makes the thing without the quality essentially different from the thing as it was believed to be.” Applying this test I do not think the mistake was sufficiently serious; the parties had agreed to trade a known area of land for a known purpose, and that purpose was not greatly hindered by the existence of the sewer. Secondly I believe that the risk of an easement coming to light had been apportioned in the contract. A clause of the contract stated that the, “the property is sold subject to any right of way and water, rights of common and other rights, easements, quasi-easements, liabilities and public rights affecting the same”. This section clearly imposes the risk of an easement coming to light upon the buyer. Hoffman LJ began his judgement by simply asking, ‘Was it [the sewer] a serious problem?’, clearly giving the benefit of any doubt to the buyer. He then set out his reasons for finding this not to be the case. Firstly Sindall had not considered alternative ways of disposing of the waste, indeed the chairman of the company had said that he had no interest in a technical solution to the problem. Secondly the sewer could be integrated into the sewerage system that would serve the new development with relative ease, resulting in the loss of only one house. Thirdly, since the initial issuing of the writ Cambridgeshire had rendered the sewer in question irrelevant by redirecting its content into alternative sewers, at a minimal cost of fifty-four thousand pounds. This led Hoffman LJ to find the sewer a defect in title, but not a serious problem. The other claim is that Cambridgeshire County Council, in the negotiations that led up to the contract, made representations which were not true, and without which Sindall would not have entered the contract, and that therefore the Council were guilty of a number of misrepresentations. The most important representations were made in response to a number of questions posed by Sindall. The representation most pertinent to the case was made in reply to question No.7, “Is the vendor aware of any rights…which are exercisable by virtue of an easement…or are in the nature of public…rights?” To this the Council replied, “Not so far as the vendor is aware.” It would appear that there is no misrepresentation in this dialogue, neither party disputes that the Council was ignorant of the existence of the sewer until Sindall informed them. However the case of Brown v. Raphael [1958] 2 All ER 79 states that an answer such as that made by Cambridgeshire Council carries with it an implied assurance that they have reasonable grounds for holding that belief. The case then rests upon whether Cambridgeshire County Council should have been aware of the existence of the sewer.The existence of the sewer was not recorded in the city’s map of all public sewers, nor was it mentioned in the deeds of the property, and one would expect the granting of an easement to be recorded here. These documents were examined by a Mr Harradine, a Council official, and employees of Prudential Property Services, who were marketing the site; another senior Council employee, Mr Scott, inspected the site on foot. The question the Court had to decide is were these steps sufficient to answer Sindall’s questions with confidence. The existence of the sewer was mentioned in several documents that were in either the City or County Council’s possession. Firstly compensation was paid by the City to the County Council for the laying of the sewer across their land, this was recorded in the minutes of the county education committee. Secondly there was a closed file in the County archives which briefly discussed the sewer in question. Finally, in 1972, the education authority built a youth centre on part of the property in question, the documentation concerning this building made several references to the sewer under Sindall’s land, but this documentation was in the hands of the architects and the City Council. Sindall claim that in particular the final documentation should have been found. This is because another of the pre-contractual questions, No.5, was, “Does the property (youth centre) have drainage…services?..c.)Do any of the services pass through or over the property not included in the sale?” The council answered this by saying that it understood mains services to be available, but that it could not guarantee them, and prospective purchasers should make their own inquiries. No investigations were made into the matter by the Council. Mr Scott explained that this lack of inquiry was because he believed the building was to be demolished, and that the question was therefore irrelevant. Sindall claim that reasonable investigation into this question would have revealed the existence of the sewer. Thirdly Sindall claim that two of the conditions of sale amounted to misrepresentations, these were 28 (’The vendor sells as beneficial owner’) and 29 (’The property is sold with vacant possession on completion’). It was condition 28 which the judge at first instance accepted as a misrepresentation.Sindall also claim that, if there was not found to be a misrepresentation concerning the Council’s pre-contractual statements, then there was a misrepresentation in respect of the adequacy of the County’s records. Sindall claim that because the county land agent’s files for the relevant period had been destroyed, the Birchwood document misfiled, and documents relating to the Youth Centre not kept, the records used were inadequate. Sindall also made a number of claims that other statements made by the Council were misrepresentations, these were much weaker than the allegations I have already covered, and so are not worthy of detailed analysis. The issue the court is addressing in this case, in respect to query No.7 is, ‘what measures must a vendor take in order to ensure the accuracy of the answers given to a vendee?’. The test formulated in Brown v. Raphael to answer this one of reasonableness. Any test of what is reasonable is by its nature subjective, therefore a decisive answer as to how the law would apply to these facts is not simple. However I would expect the court to accept as reasonable, measures which would ordinarily be expected to reveal the answer to the specific question. In my opinion the measures Cambridgeshire Council took, outlined previously, could ordinarily be expected to reveal any easements or other restrictions as to the use of the land. As such I think it would be unreasonable of the law to expect the sellers of property to do more. The answer to enquiry No. 5 is less simple, the actions the Council undertook were insufficient to answer the question with any degree of authority, but that little or no investigation had been undertaken was made clear in the answer. Does this answer still come within the implied representation precedent established by Brown v. Raphael? The judgement of Lord Evershed in this case stated the principle thus, “wherever it is stated that one party entertains a particular belief, then it must follow that there is a representation that he has grounds for reasonably holding that belief.” In respect of inquiry No.5, the council stated that they understood drainage services to be available, surely less certain than a belief. They also made it clear that the understanding was not based on any reasonable inquiries and that purchasers should pursue their own inquiries. Therefore I would not find this answer to be subject to a Brown v. Raphael implied representation, and thus not a misrepresentation at all. One could also question strongly whether or not this answer had any influence on Sindall’s decision to buy the property, considering that Sindall never asked for any clarification, or made any investigations of their own. Thirdly there is the alleged misrepresentation concerning the adequacy of the Council’s records. This raises two questions; firstly were the records adequate? And secondly, does the law recognise such an implied representation in the answers given by the council? I would argue that because I consider the inspection of the deeds and the city sewer map as sufficient investigation of documents as regards inquiry No.7, the failure of the other documents to be kept or filed correctly is irrelevant. Secondly I do not believe Lord Evershed M.R. intended his precedent to be interpreted as widely as Sindall are proposing, there is certainly nothing in his judgement to support Sindall’s argument. Imposing a requirement on companies and public bodies to maintain records of a certain standard also has serious policy implications. How does the law apply to the alleged misrepresentations concerning conditions of sale 28 and 29. Selling as ‘beneficial owner’ carries with it four implied covenants, one of these is that the property is free from incumbrances. Whilst this was not the case I cannot see how this representation differs from the answer to query 7, and so for the same reasons I would not find it to be a misrepresentation. Condition 29, that the land was vacant, is not in my opinion a misrepresentation. Lord Justice Hoffman also fails to find any misrepresentations in the answers and actions of Cambridgeshire County Council, but his interpretation differs slightly to mine. To Sindall’s claims over Inquiry No.7, he found that the investigations made by the Council were sufficient. To Sindall’s claims about Inquiry No.5 Hoffman takes a slightly different approach, he does not examine whether or not the answer is in fact a misrepresentation, rather he reasons that because Sindall didn’t make any further inquiries, it can’t have mattered to them. Presumably then he is rejecting the misrepresentation as having no influence on Sindall’s decision to purchase. Concerning the alleged misrepresentation about the accuracy of the Council’s records, Hoffman LJ agrees with the original Judge, that the implied representation is much narrower than argued by Sindall, and that any remedy would be obtained through negligence rather than misrepresentation. Hoffman rejects the arguments put forward about Sections 28 and 29, for much the same reasons as I outlined earlier. Hoffman LJ concludes with his decision as to whether, if a remedy had been granted, it would have been limited to damages, these considerations have little bearing on the facts of this case. Hoffman’s judgement is entirely consistent with the letter of the law, and so could be considered formalist. However there is evidence that he was always unlikely to find for a party that was, quite unashamedly, trying to escape from a bad business decision, in this way the judgement could be seen as realist. The wider implications of this case are quite considerable. The laws of property and contract both aim to make transactions and sales as simple as possible, whilst still protecting the parties involved. A decision against the Council in this case would go directly against this ethos, considerably widening the duties imposed on sellers, and allowing parties to escape bad deals with much greater ease.