The High Court has dismissed a misrepresentation claim following an auction sale in the case of Co Mayo Estates Limited v Hidden Gem Limited [2024] EWHC 401 KB, providing a useful reminder of the principles underpinning misrepresentation claims arising from the sale of land.
Background
Co Mayo Estates Limited sold 3 plots of land (known as Plots G, I and L) to Hidden Gem Limited at an online auction. Hidden Gem paid £26,359 for Plot G and was required by the contract of sale to pay a £6,000 deposit for each of Plots I and L. It only paid £2,000 for each plot and Co Mayo Estates brought a claim for the remaining £8,000. In response, Hidden Gem sought to rescind the contract for misrepresentation and brought a counterclaim for £33,859.
The alleged misrepresentation was contained in the auction pack, which included phrases such as "each plot with frontage and potential", "clearly offers a number of opportunities for a purchaser to consider alternative uses or even development of each plot, subject to the necessary consents", and also included CGI images showing residential properties. However, the auction pack also stated that "Buyers are deemed to rely solely on their own enquiries with regard to any development potential that may exist but are invited to utilise the computer generated image shown in these particulars as an idea to take forward pre-application planning advice with the local authority".
Hidden Gem claimed that the seller had represented that the plots had a real possibility for use for residential development, when in reality the plots were valueless and useless as they consisted of ancient woodland and were in an area of outstanding natural beauty with no prospect of planning permission.
Co Mayo Estates denied any representation of fact or any false representation of fact and also denied that the applicant had relied on any misrepresentation or that any misrepresentation had induced the contract of sale.
The relevant law
The Judge adopted the following three propositions from the 34th Edition of Chitty on Contracts as being relevant to the appeal:
- The meaning of a representation depends on how the words would be understood by a reasonable person in the factual context;
- Although the traditional view is that a misrepresentation must be a false statement of fact, nevertheless a statement of opinion may be a representation if the maker does not hold the opinion stated; and
- A statement of opinion may amount to an implied representation that the maker has reasonable grounds for his opinion.
The decision at first instance
The trial judge found there was no misrepresentation and ruled in favour of the seller. There was no prospect of the land being acceptable for residential development and the seller was not in a better position than the buyer to know facts about the planning position, the details were available to either party from the local planning authority. It was this finding that the buyer appealed.
Decision of the High Court
The High Court dismissed the appeal and found that the Judge at first instance had not made any error. The seller was not in a better position to make enquiries of the local planning authority. If the sale documentation was read as a whole, it did not represent a real possibility of planning permission being granted for development.
The CGI images may have encouraged unwise speculation but they were marked subject to planning permission.
The court also found even if an alleged implied misrepresentation had been made, which in this case it had not, it would have been too vague to have any legal consequences.
This case emphasises the need to read the auction pack in its entirety and for auction purchasers to always undertake your own due diligence prior to bidding on properties.
