Rushton & Anor v Worcester City Council

A secure tenant’s exercise of the statutory right to buy under Part V of the Housing Act 1985 does not involve a contract. The landlord’s obligation to convey, and the price and terms of conveyance, derive solely from the statutory scheme. Damages under section 2 of the Misrepresentation Act 1967 are therefore unavailable.

A local authority which fails to disclose a known structural defect as required by section 125(4A) remains liable for breach of statutory duty. Recoverable loss may include wasted acquisition expenditure and the foreseeable value of a lost future right-to-buy transaction. Hypothetical expenses and inconvenience which were never incurred are not recoverable.

The claimants purchased a system-built Orlit house from Worcester City Council under the statutory right-to-buy scheme. The council knew that high alumina cement in the structural stitch joints created a risk of deterioration and possible failure. Its statutory offer notice disclosed only that the property was designated defective because of a separate carbonation problem.

Mr Recorder Rundell held the council liable for breach of section 125(4A) of the Housing Act 1985 and misrepresentation under section 2(1) of the Misrepresentation Act 1967. He awarded £30,000 damages, including wasted purchase costs and the value of a lost opportunity to buy the house after repair.

The council appealed against liability and quantum. The principal issue was whether a right-to-buy conveyance followed a contract capable of supporting a statutory misrepresentation claim. Further issues concerned contributory negligence, valuation, the statutory cost floor and the recoverable heads of loss.

1. Appeal allowed in part. Potter LJ delivered the judgment of the court. The finding of liability under section 2 of the Misrepresentation Act 1967 was set aside, but liability for breach of section 125(4A) of the Housing Act 1985 was preserved. Damages were reduced from £30,000 to £21,083.93.

2. The recorder was entitled to infer that the City Architect knew and understood the distinct high alumina cement and conversion defect. The council’s failure to appreciate that the defect had to be identified in the statutory offer notice was no defence. The notice disclosed only the separate carbonation defect.

3. Part V of the 1985 Act creates a prescriptive statutory procedure. The landlord’s duty to convey, and the price and terms of conveyance, derive solely from the Act. The transaction is not a consensual agreement formed by offer and acceptance. Since section 2 of the 1967 Act requires the representee to have entered into a contract, it afforded no remedy.

4. Had that remedy been available, the stated market value could have carried an implied representation that the council knew of nothing making the valuation substantially inaccurate and had reasonable grounds for its opinion. A bare statement of market value, however, is ordinarily an opinion rather than a representation of fact. This reasoning was non-dispositive because no contract existed.

5. The recorder properly rejected contributory negligence. The claimant obtained a reasonably thorough survey from a qualified surveyor and could place considerable reliance on her longstanding landlord’s statutory disclosure duty.

6. Damages for breach of statutory duty included the acquisition costs wasted on a valueless asset and the foreseeable value of the lost opportunity to exercise the right to buy after repair. The property had to be valued with the serious defect known and taken into account. A speculative sale to an uninformed purchaser was not a valid basis for attributing value.

7. The council could not invoke the 1998 cost-floor determination on appeal to eliminate the lost-discount award. It had not disclosed or properly advanced the determination at trial, and there was no evidence of the repaired property’s value at the relevant future date. Applying it on appeal would prejudice the claimants.

8. The £4,800 allowed for hypothetical accommodation, removals and inconvenience was irrecoverable because those costs and disadvantages were never incurred. A further £4,116.07 was deducted because mortgage interest and the rent otherwise payable were to be treated as cancelling each other.

1. Court of Appeal (Civil Division): The appeal was allowed in part. Liability under section 2 of the Misrepresentation Act 1967 was set aside. Liability for breach of section 125(4A) of the Housing Act 1985 was upheld, and damages were reduced to £21,083.93: [2001] EWCA Civ 367.

2. County Court at Worcester: Mr Recorder Rundell found the council liable for breach of statutory duty and misrepresentation and awarded the claimants £30,000 inclusive of interest. No citation is stated.