Shaftsbury House (Developments) Ltd v Lee

A purchaser claiming misrepresentation must prove what was said, its objective meaning, falsity, actual understanding and reliance. A forecast by a party with relevant skill is not an absolute guarantee; the question is whether it was made with reasonable care and skill and had reasonable grounds. Entire agreement clauses in consumer land contracts may fall within the Unfair Terms in Consumer Contracts Regulations 1999, but fairness is assessed at the time of contracting and in all the circumstances. A party who affirms the contract cannot later rescind it. The innocent party ordinarily need not accept an anticipatory repudiation, and the exceptional equitable jurisdiction recognised in The Alaskan Trader was not established on these facts.

The claimant agreed to sell the defendant a 150-year lease of an apartment bought off plan. The defendant failed to complete, and the property was subsequently resold. The claimant sought damages for the resale loss and related costs; the defendant counterclaimed for return of the deposit.

The defendant alleged that the claimant’s estate agent had represented that the property would rise in value, that she would make a profit, and that the apartment could be sold on without loss if she could not complete. She relied on misrepresentation, warranty, collateral contract, estoppel and unfairness in an entire agreement clause. She also alleged failure to mitigate loss.

1. Judgment for the claimant. The defendant failed to prove the alleged representations, assurances or promises. The evidence established only that the estate agent had said something reassuring about rising property prices and resale, without sufficiently reliable detail to support findings in the pleaded terms.
2. Even if the alleged statements had been made, they would not have amounted to mere puffery. Communications intended to reassure a recipient about a substantial transaction may be taken seriously. However, they could not objectively be construed as a promise that the claimant would absorb any market loss or return the deposit.
3. A forecast made by a person with special knowledge is not an absolute warranty that the forecast will prove accurate. Applying Esso Petroleum Co Ltd v Marden and the approach in Avon Insurance v Swire Fraser, the relevant question was whether the forecast was sound and reasonably made with reasonable care and skill. The expert evidence showed that, in March 2007, there were reasonable grounds for believing that the property was likely to rise in value. The representation was therefore not false.
4. The defendant also failed on reliance. She knew that property values could fall and that there was no guarantee of a rise. She understood the contractual commitment and instructed solicitors to exchange contracts. Her evidence showed that she took comfort from the agent’s opinion rather than relying on a representation that she would not be liable for damages.
5. Clause 18 was an entire agreement and non-reliance clause. The Unfair Terms in Consumer Contracts Regulations 1999 applied because the defendant was a consumer and the claimant was acting as a seller. Nevertheless, considering the clause’s wording, prominence, the defendant’s legal knowledge, the period for consideration, and her legal representation, the clause was not unfair. The court expressed the provisional view that a contractual acknowledgement of this kind would itself be subject to the Regulations, but that issue did not arise for decision.
6. The defendant affirmed the Agreement by continuing to market the property and failing to rescind promptly after learning of the alleged misrepresentation. The counterclaim therefore failed.
7. The claimant was not shown to have failed to mitigate. The duty to mitigate could not arise before breach, and the defendant’s conduct treated the Agreement as continuing. The exceptional equitable principle discussed in Clea Shipping v Bulk Oil International Ltd (The Alaskan Trader) did not assist, whether because it was doubtful that the principle applied to a sale of land or because no exceptional circumstances or unreasonable conduct were established.

The claim succeeded and the counterclaim was dismissed.