William Sindall Plc v Cambridgeshire County Council

A contract for the sale of land which makes the sale subject to all easements, save for latent easements known to the vendor or of which it has the means of knowledge, allocates the risk of an unknown easement to the purchaser. There is then no scope for rescission for common or equitable mistake.

An answer that the vendor is unaware of an encumbrance represents both absence of actual knowledge and reasonable conveyancing investigations. It does not generally represent that the vendor or its predecessors kept perfect historical records. A notice whose legal effect has been spent need not be disclosed as a notice affecting the property.

Observations on Misrepresentation Act 1967 section 2(2) stated that damages in lieu of rescission compensate for the defect represented, rather than transferring an unrelated fall in market value.

The County Council sold building land to the developer. After completion, a foul sewer and a private drainage easement were discovered beneath the site. The developer purported to rescind, alleging breach of title obligations, misrepresentation in replies to pre-contract enquiries, and common mistake.

The Mayor’s and City of London Court held that the purchaser could rescind. The vendor appealed. The central issues were whether the contractual conditions allocated the risk of the undisclosed easement, whether the replies to enquiries were actionable misrepresentations, and whether mistake could justify rescission after completion.

1. Appeal allowed unanimously. Hoffmann LJ gave the principal judgment. Evans LJ agreed with it and gave additional reasons. Russell LJ agreed with both judgments. The purchaser’s action was dismissed.

2. The sewer was a defect in title, but it was a private easement rather than land acquired by adverse possession. The evidence showed that it could have been diverted promptly, with at most a minor alteration to the approved layout. It was therefore not, in practical terms, a serious impediment to use of the site.

3. Condition 14 of the National Conditions of Sale and special condition 17(e) required the purchaser to take the land subject to all easements, except latent easements known to the vendor or of which it had the means of knowledge. Those terms did not distinguish easements by their seriousness or by the identity of the person who created them. They allocated the risk of the unknown easement to the purchaser. The transfer also expressly subjected the land to easements, so there was no breach of contractual or title-covenant obligations.

4. There was no actionable misrepresentation. An answer that the vendor was unaware of an encumbrance carried an implied representation of reasonable investigation, which had been made. It did not warrant faultless historic record-keeping. The statutory notice allowing construction of a sewer had spent its legal effect and did not itself create the easement. It was neither a notice requiring disclosure nor a notice deemed to have been served on the successor council under the relevant transitional provisions.

5. Because the contract allocated the risk of an unknown easement, there was no room for rescission for mistake. Hoffmann LJ and Evans LJ further stated, obiter, that if rescission for innocent misrepresentation had otherwise been available, damages under Misrepresentation Act 1967 section 2(2) would have been appropriate. The relevant loss was the cost or diminution attributable to the defect, not the subsequent market collapse. Rescission would have imposed a grossly disproportionate loss on the vendor.

The appeal was allowed with costs in the Court of Appeal and below. Leave to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division): Allowed the vendor’s appeal, reversed the finding that the purchaser could rescind, and dismissed the action.

• Mayor’s and City of London Court: His Honour Judge Roger Cooke held that the purchaser was entitled to rescind. The citation is not stated in the judgment.