Francis & Anor v Charles Knapper & Ors

A vendor’s solicitor ordinarily owes no duty of care to a purchaser for pre-contractual representations made on behalf of the vendor. A standard-form disclaimer reinforces that position, although it cannot exclude liability for fraud. Deceit requires proof that the representation substantially contributed to the claimant’s decision to act; a rebuttable presumption of inducement yields to clear evidence of what actually influenced the claimant. Carelessness alone does not establish fraud: the defendant must know the statement is untrue, lack belief in its truth, or be reckless in the relevant sense. A solicitor may assume responsibility for information supplied in a transaction, but that responsibility depends on the objective scope of the undertaking and may be withdrawn before it has operative effect.

The claimants purchased a holiday park from a company whose conveyancing solicitors were the first and second defendants. They alleged that answers to commercial property standard enquiries falsely described the park’s condition and that correspondence misstated the number of chalet owners who had paid service charges.

The claimants pursued deceit and negligent misstatement claims concerning the park representations, and negligent misstatement concerning the service charges representation. The third defendant, the vendor’s managing director, was sued in deceit in relation to the park representations. The central issues were whether the representations induced the purchase or completion payment, whether the defendants owed or assumed relevant duties, whether the mental element for deceit was established, and whether loss was proved.

1. The claims were dismissed. The park representations were inaccurate, but the claimants failed to prove that they relied on them. The evidence showed that Mr Francis decided to proceed on his own assessment of the property and on the anticipated ability to recover necessary expenditure through service charges. The rebuttable presumption of inducement was therefore displaced.
2. Under [1992] Ch 560, the vendor’s solicitor ordinarily owes no duty of care to the purchaser for the vendor’s pre-contractual representations. The CPSE disclaimer reinforced that conclusion. It did not exclude fraud, but the negligence claim failed independently on duty.
3. The third defendant knew significant facts concerning the park but gave the relevant answers without belief in their truth. Had the claimants relied on them and suffered loss, that would have established deceit. The first defendant, however, did not know the facts making the answers inaccurate and had reasonably relied on the managing director’s instructions. His conduct therefore involved neither deceit nor negligence.
4. The claimants also failed to prove loss. The valuation evidence did not establish that the park was worth less than the price paid after accounting for the possible recovery of repair costs through service charges.
5. As to the service charges representation, the solicitor’s correspondence briefly assumed responsibility for the figures, but that undertaking was withdrawn before it had any consequence. The claimants would have proceeded on the same figures and declined an escrow arrangement in any event. No relevant duty or causative breach was established.