In the recent case of Thorp and another v Abbotts and another [2015] the High Court has dismissed a claim of misrepresentation where it was alleged that the sellers of the property had given fraudulent replies in the Seller’s Property Information Form (SPIF).
An inaccurate pre-contract statement, whether made in a reply to pre-contract enquiries or not, may entitle the buyer to bring a claim for misrepresentation or negligent misstatement. The misrepresentation may be fraudulent, negligent, or innocent, depending on the seller’s state of knowledge at the time of the representation.
Facts
Briefly, the facts of the case were that in 2010, the Abbotts sold their house to the Thorps for £625,000. After the purchase, the Thorps were made aware of proposals for large scale developments in the area. These proposals dated back to before they purchased the property when it was still owned by the Abbotts, although these proposals were not set in stone at this stage. The Abbotts were aware of the planned development having attended public meetings regarding the development. They had also signed a petition against it, had discussions about the proposals with nearby residents and had received communications through the post regarding the events.
In this case the questions which resulted in the alleged misrepresentation were:
“3. Notices 3.1 Has the seller either sent or received any communication or notices which in any way affect the property (for example from or to neighbours, the council or a government department)? If yes, please supply a copy.
3.2 Has the seller had any negotiations or discussions with any neighbour or any local or other authority affecting the property in any way? If yes, please give details.”
The seller answered ‘no’ to both questions.
A few months after the purchase was completed, the buyer commenced legal proceedings against the seller for damages for fraudulent misrepresentation. The claimant stated that if the seller had answered the SPIF truthfully, the replies would have revealed proposals for the nearby development and they would have withdrawn from the purchase.
Decision and Comment
The Court ruled in favour of the defendant, holding that the seller’s answers were not misrepresentations.
The Judge stated that the words ‘communication’ and ‘affecting’, used in the questions, should each be given a ‘relatively confined’ interpretation in favour of the seller. The Judge then further argued his ruling on:
- The starting point in a conveyancing transaction is still ‘caveat emptor’.
- The questions on the SPIF are intended to be capable of answer by a lay person, and should not be interpreted in such a way that expert advice would be needed to understand the information required.
- The other questions in the SPIF were consistent with an interpretation that the enquiry raised by question 3 was to matters which were either directly about the property itself or were concerning immediately adjoining properties, not regarding planning proposals a distance away from the property.
- Question 3.2 referred to negotiations and discussions specifically with a neighbour or authority affecting the property. Discussion with someone not in a position to carry out or authorise the proposal, such as a local resident, would not affect the property because the outcome of the discussion would have no bearing on whether the proposal went ahead or not. To find otherwise would mean that sellers were required to disclose matters that may be no more than gossip.
In summary, the Court considered that these terms should not be construed too widely, so as to force sellers to disclose speculative and remote information. There needs to be a degree of certainty that an event was likely to happen and would affect the property before an obligation to disclose arose. It also appears that the Court considered the possible influence of the development on value alone was not enough to require disclosure.
