McCullagh v Lane Fox And Partners Ltd

An estate agent may in principle owe a prospective purchaser a personal duty of care for a careless misstatement causing pure economic loss. The governing question is whether responsibility was assumed under the Hedley Byrne principles.

A disclaimer is relevant to assumption of responsibility as a matter of fact. It is assessed objectively, rather than merely construed as a contractual exclusion. Where written particulars clearly disclaim responsibility and an oral statement merely repeats them, the disclaimer may prevent any duty arising. Under the Unfair Contract Terms Act 1977, reliance on such a notice is permissible where it is fair and reasonable. On the facts, the disclaimer was effective and the appeal was dismissed.

Lane Fox marketed a riverside house as occupying approximately 0.92 of an acre. Mr McCullagh viewed the property, was told the same figure orally, and exchanged contracts shortly afterwards. The particulars contained broad disclaimers of responsibility. He later discovered that the site was less than half an acre and sued the estate agents in negligence.

Colman J found an oral misrepresentation, reliance and a duty of care, but held that the property had been bought at market value and entered judgment for Lane Fox. On appeal, the valuation was reduced to £800,000, producing a possible loss of £75,000. The central issues were whether Lane Fox owed a duty, whether the disclaimer was effective under the Unfair Contract Terms Act 1977, and whether the appeal could succeed despite the disclaimer.

Disposition. The appeal was dismissed with costs. Leave to appeal to the House of Lords was refused.

1. Valuation. Hobhouse LJ concluded, with which Slade LJ and Nourse LJ agreed on this issue, that the evidence established an open-market value of £800,000. The claimant therefore proved £75,000 loss. That finding could not produce liability without a duty of care.
2. Agency and negligent misstatement. Applying Hedley Byrne [1964] AC 465, an agent is not immune from personal liability merely because he acts for a principal. An estate agent may owe a prospective purchaser a duty where responsibility is assumed and reliance is reasonably foreseeable. The solicitor-specific approach discussed in Gran Gelato [1992] Ch 560 did not automatically extend to estate agents.
3. Effect of the disclaimer. A disclaimer in a negligent-misstatement case is not treated merely as a contractual exclusion clause. It is part of the facts relevant to whether responsibility was assumed. Objectively, a purchaser who received particulars disclaiming responsibility for statements about the property could not reasonably regard an oral repetition of the same acreage figure as an assumption of responsibility.
4. Statutory reasonableness. Under sections 2(2) and 11(3) of the Unfair Contract Terms Act 1977, the defendants had to show that reliance on the notice was fair and reasonable. That requirement was satisfied. Mr McCullagh was experienced, possessed the particulars, had time to obtain independent advice, had the benefit of legal representation, and contracted on an equal footing. The disclaimer therefore remained effective and Lane Fox owed no duty in respect of the acreage.
5. Separate reasoning. Slade LJ doubted that an innocent misrepresentation made without an initial assumption of responsibility could generate tortious liability merely because the representor later learned that the purchaser would rely on it. Nourse LJ regarded that issue as unnecessary to decide. Both agreed that the disclaimer independently defeated the claim.

• Court of Appeal (Civil Division): The court found the property’s value to be £800,000 but dismissed the appeal because the disclaimer negated any duty of care. [1995] EWCA Civ 8
• High Court of Justice, Queen’s Bench Division: Colman J found an oral misrepresentation, reliance and a duty of care, but held that the claimant had suffered no loss and entered judgment for Lane Fox.