Factual and Procedural Background
The Plaintiff claims damages for alleged misrepresentations made by or on behalf of the Defendant prior to the purchase of a leasehold property (the "Property") on 8 July 2016. The Plaintiff asserts that the Property was marketed and sold as having two bedrooms on the second floor, including one at the front featuring a Velux rooflight window. However, there was no planning consent for the Velux Window, which had to be removed after purchase, rendering the front room unsuitable as a bedroom due to lack of natural light and ventilation.
The claim is brought under section 1 of the Misrepresentation Act 1967, requiring the Plaintiff to establish that an actionable representation was made, it was untrue, relied upon, and caused loss. The burden then shifts to the Defendant to prove reasonable grounds for believing the representation was true.
The Defendant appeared by its sole director, who participated remotely due to COVID-19 and geographic distance. Both parties were found to be honest witnesses.
Prior to purchase, the Plaintiff viewed the Property without seeing planning or lease plans. The Property had been developed from one house into two apartments, with the second floor divided into two rooms described as bedrooms on the lease plans, but the front second floor bedroom relied solely on the Velux Window for light and ventilation. No planning permission had been obtained for the Velux Window, although building regulations were complied with at the time of completion.
The Plaintiff received communications referring to the front second floor room as a bedroom and was provided lease plans labeling it as such. During conveyancing, the Defendant signed a Law Society Information Form asserting no breaches of planning permission or unconsented work. The Plaintiff proceeded with the purchase at the asking price.
In October 2017, the Plaintiff was informed by the local council of the unauthorised Velux Window and the impossibility of obtaining retrospective planning consent. Consequently, the Plaintiff removed the Velux Window and reconfigured the Property, converting the first floor living room into a bedroom and installing a bathroom in the front second floor room.
Legal Issues Presented
- Whether actionable misrepresentations were made to the Plaintiff regarding the lawful use of the front second floor room as a bedroom;
- Whether the Defendant had reasonable grounds to believe the representations were true at the time of sale;
- Whether the Plaintiff relied on those representations in entering the contract;
- Whether the Plaintiff suffered loss as a result of the misrepresentations;
- The quantification of damages recoverable by the Plaintiff.
Arguments of the Parties
Plaintiff's Arguments
- The front second floor room was represented as capable of use as a bedroom, supported by email communications and lease plans.
- The Defendant represented, via the Law Society Information Form, that there were no breaches of planning permission or unconsented work, implying reasonable grounds for that belief.
- The Plaintiff relied on these representations in purchasing the Property, valuing the flexibility of two bedrooms on the second floor.
- The Plaintiff suffered loss, including capital loss, increased stamp duty, and costs related to removal of the Velux Window and associated advice.
Defendant's Arguments
- The reference to the front second floor room as a bedroom did not amount to a representation that it was intended or capable of use as a bedroom, given the planning permission plans showed a different configuration.
- The Defendant contended that the internal configuration was flexible and it was for the purchaser to decide room usage.
- The Defendant claimed no greater access to information than the Plaintiff, as the development was conducted through agents and subcontractors while the Defendant was abroad.
- The Defendant asserted reasonable grounds to believe no planning permission breaches existed, relying on lack of notice of any issues and delegation of decisions to subcontractors.
- The Defendant argued the Plaintiff's solicitors could have discovered the lack of planning permission through their own enquiries.
- The Defendant contended the Plaintiff unreasonably refused an offer to replace the Velux Window at no cost.
- The Defendant disputed that the cost of installing a bathroom was recoverable as loss flowing from the misrepresentation.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Smith v Land and House Property Corporation (1884) 28 ChD 7 |
Express statements implying reasonable grounds for belief when facts are not equally known. |
Cited to support that the Defendant's statement in the Information Form implied reasonable grounds for belief in absence of contrary knowledge. |
| Brown v Raphael [1958] 1 Ch 636 |
Implied representation arises when one party is better equipped with information than the other. |
Applied to show that the Defendant, being better informed about the Property's planning status, impliedly represented having reasonable grounds for belief. |
| William Sindall Plc v Cambridgeshire County Council [1994] 1 WLR 1016 |
Statements of vendor's knowledge imply reasonable steps taken to ascertain defects. |
Referenced to confirm the principle that the Defendant's negative statement about breaches implied reasonable enquiry. |
| Laurence v Lexcourt Holdings Ltd [1978] 1 WLR 1128 |
It is no defence that the representee could have discovered the truth by their own enquiries. |
Applied to reject the Defendant's argument that the Plaintiff's solicitors could have discovered the lack of planning permission. |
| Redgrave v. Hurd (1881) 20 ChD 1 |
Misrepresentor cannot defend on basis that the representee failed to verify the truth. |
Reinforced the above principle regarding the burden on the representor. |
| Coopers Payen Limited v Southampton Container Terminal Limited [2003] EWCA (Civ) 1223 |
Weight to be given to expert evidence, especially when unchallenged. |
Guided the court's evaluation of the sole expert valuation evidence presented by the Plaintiff. |
| Griffiths v TUI (UK) Ltd [2021] EWCA Civ 1442 |
Expert opinion may be rejected if reasoning is inadequate or incomplete. |
Supported the court's caution in accepting the expert valuation report due to its limitations. |
| East v Maurer [1991] 1 WLR 461 |
Damages may include consequential losses flowing from misrepresentation. |
Considered but ultimately rejected for the Plaintiff's claim for bathroom installation costs. |
| Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158 |
Damages for fraud include capital loss and extra expenses caused by misrepresentation. |
Referenced in relation to consequential loss claims, but distinguished from the facts here. |
Court's Reasoning and Analysis
The court applied the statutory framework under the Misrepresentation Act 1967, requiring the Plaintiff to prove an actionable misrepresentation, its falsity, reliance, and loss, with the burden then shifting to the Defendant to prove reasonable grounds for belief in the truth of the representation.
Objectively, the court found that referring to the front second floor room as a bedroom in communications and lease plans reasonably led the Plaintiff to believe the room was lawfully usable as a bedroom. The Defendant's argument that internal configuration was flexible and that planning permission plans showed a different layout was accepted as correct in principle but irrelevant to the representations actually made to the Plaintiff.
The court held that the Defendant's negative answers in the Law Society Information Form implied reasonable grounds for belief that all necessary consents existed, given the Defendant's superior knowledge as the developer. The Defendant did not have reasonable grounds, having relied on memory without proper enquiry, and was unaware of the lack of planning permission for the Velux Window at the time of sale.
The Plaintiff's reliance on the representations was accepted, as was the causation of loss. The Defendant's argument that the Plaintiff or her solicitors could have discovered the lack of planning permission was rejected, consistent with established case law.
Regarding damages, the court critically assessed the Plaintiff's expert valuation, noting it was premised on the Property as a one-bedroom apartment and lacked sufficient comparables. Despite limitations, the court accepted that the Property's value was reduced by the loss of use of the front second floor room as a bedroom and that the Plaintiff suffered a capital loss of approximately £30,000.
Additional recoverable losses included a proportionate amount of increased stamp duty and costs for removal of the Velux Window and professional advice. The claim for the cost of installing a new bathroom was rejected as not flowing from the misrepresentation but rather a choice by the Plaintiff.
The court found the Plaintiff did not unreasonably fail to mitigate loss by declining the Defendant's offer to replace the Velux Window, given the terms attached to that offer.
The court emphasized that its findings do not impugn the Defendant's integrity or skill but reflect the Defendant's failure to make reasonable enquiries about planning consents before making representations.
Holding and Implications
The court held that the Defendant is liable for misrepresentation under the Misrepresentation Act 1967.
Holding: The Defendant shall pay damages to the Plaintiff in the total sum of £34,142.92, comprising:
- £30,000 for the capital loss on the Property;
- £1,399.60 for increased stamp duty attributable to the overpayment;
- £2,535 for removal of the Velux Window and related repairs;
- £208.32 for professional advice costs.
The decision directly affects the parties by awarding damages to the Plaintiff for losses caused by misrepresentations. No new legal precedent was established; the ruling applies established principles of misrepresentation and damages assessment.