SPS Groundworks & Building Limited v Ms Satvinder Kaur Mahil

A vendor of land must disclose known defects in title fully, frankly and fairly before contract. Merely placing the relevant document in a general legal pack, or directing bidders to inspect it, may be insufficient where the defect is unusual and is not specifically identified. Caveat emptor does not displace this equitable duty, and contractual terms deeming the purchaser to know the title cannot circumvent it.

An opinion may amount to a misrepresentation where the maker did not hold it, or could not reasonably and honestly have held it with knowledge of the facts. Reliance need not be the sole inducement, but the claimant must show that the representation was one of the causes inducing entry into the contract.

The claimant sold land by auction. The defendant made the highest bid, signed the sale memorandum and paid a deposit, but refused to complete after discovering an overage covenant requiring payment of 50 per cent of any increase in value attributable to planning permission. The claimant accepted the refusal as repudiation and sued for the resale shortfall. The defendant counterclaimed for repayment of the deposit and buyer’s premium.

Following a three-day trial, His Honour Judge Murdoch awarded the claimant £43,440 and dismissed the counterclaim. Permission to appeal was granted on six grounds, principally concerning disclosure of the title defect, alleged misrepresentations about development potential, reliance, incorporation of auction conditions and the treatment of expert evidence.

1. Appeal allowed. The overage covenant was a defect in title. A vendor must give full, frank and fair information about such a defect, or provide a fair and proper opportunity to obtain that information.
2. The claimant did not satisfy that duty merely by placing the covenant in the legal pack and making general references to the need to read legal packs. The auction materials did not draw attention to any unusual feature of this particular title. Specific reference in the particulars, an addendum, or an announcement by the auctioneer would have been sufficient. The purchaser’s failure to inspect the pack did not relieve the vendor of the duty, and the contractual conditions could not deem knowledge of the defect or otherwise circumvent the equitable principle. The trial judge wrongly relied on caveat emptor in relation to the title defect.
3. The descriptions of the land as having excellent scope for development and being a superb investment opportunity were opinions. An opinion may be treated as a statement of fact where the maker did not hold it, or could not reasonably and honestly have held it with knowledge of the facts. The trial judge had found only that the director believed there was some eventual development potential. He had not found that he honestly believed there was excellent scope for development. No reasonable person with his knowledge could equate the former view with the representations made. Grounds two and three were nevertheless treated separately: the finding that the defendant did not rely on the descriptions was one the trial judge was entitled to reach, because reliance need not be the sole cause but must be one of the inducing causes.
4. The pleading ground failed. The particulars adequately raised incorporation of the auction conditions into a contract formed at the fall of the hammer. Where departure from a pleading may cause prejudice, amendment should ordinarily be required, but the trial judge was entitled to find that the issue was adequately raised and that no material prejudice had been established.
5. The fifth ground did not assist the defendant because the trial judge’s reasoning relied on the Common Auction Conditions, not the separate SDL conditions. The sixth ground was not pursued. Consequential orders were left to counsel to agree.

• High Court (Queen’s Bench Division): Appeal from the order of His Honour Judge Murdoch made on 7 July following a three-day trial. Judgment for the claimant in the sum of £43,440 and dismissal of the counterclaim were challenged. The appeal was allowed.