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||Neutral Citation Number:  EWHC 2441 (Ch)
IN THE HIGH COURT OF JUSTICE
||Royal Courts of Justice
Strand, London, WC2A 2LL
||2nd August 2002
B e f o r e :
REX TEDD Q.C.
SITTING AS A DEPUTY JUDGE OF THE HIGH COURT
||VRAJ PANKHANIA (1)
||JOSHNA PANKHANIA (2)
||- and –
||THE LONDON BOROUGH OF HACKNEY (1)
||THE RECEIVER FOR THE METROPOLITAN POLICE DISTRICT (2)
HTML VERSION OF JUDGMENT
Crown Copyright ©
- On Wednesday 8th November 1999, at an auction of commercial properties held in the Ballroom at the Langham Hilton Hotel, Mr James Cannon of Nelson Bakewell, a firm of chartered surveyors, brought down his gavel to signify that bidding for the "star lot" (which combined two neighbouring properties in Shoreditch) was at an end. The properties were in separate ownership. After a vigorous contest, the successful bid, of £3,925,000, was made by the First Claimant (often called Mr Victor) bidding in person. He was acting on behalf of himself and his wife, who together conducted business under the name "Westcombe Homes". The First Claimant paid 10% of the purchase price, and signed a Memorandum of Sale, the same day. The purchase was completed on 9th February 2000. As Mrs Pankhania features very little in the evidence, for convenience, references to "the Claimant" are to Mr Pankhania.
- The purchasers allege that they purchased in reliance on two representations which were false, namely:-
(a) that National Car Parks Ltd (N.C.P.), who occupied a car park which formed part of the property, was represented to be a contractual licensee, whose occupation was terminable upon 3 months' notice, whereas N.C.P. was in fact a tenant, protected in its occupation by Landlord and Tenant Act 1954.
(b) That the likelihood that the purchasers would be granted planning consent for residential or live/work development on the car park, and the attitude of the First Defendant, London Borough of Hackney (Hackney), to such an application, was misrepresented. Hackney was not only a co-vendor, but also the local authority within whose area both sites lie, and thus the local planning authority. The vendors are alleged to have represented that the Hackney had no objection to residential or live/work development, whereas the true position is said to be that Hackney intended to adhere strictly to the terms of a Unitary Development Plan, and Guidance Notes, which militated against residential development in favour of employment based use, the property being within a defined employment area.
- The Claimants presently seek damages, not rescission. Trial on liability only was ordered. The two representations in issue both concern the property owned by London Borough of Hackney (Hackney) which is the First Defendant. However, it is conceded that both Defendants, as co-vendors, are liable in damages if the Claimants make out their claim in respect of either alleged misrepresentation.
- Three significant points of law are raised by this litigation:-
(a) Whether, as has long been supposed, no action lies for a misrepresentation as to law, or whether that rule has survived the recent decision of the House of Lords in Kleinwort Benson Ltd -v- Lincoln City Council (1999] 2 AC 349, which exposed as fallacious the proposition that no remedy was available for a mistake of law.
(b) Whether, under Misrepresentation Act 1967, s.2(2) damages may be awarded (in lieu of rescission) if the claimants no longer have a right to rescind the contract, but did so at some earlier stage.
(c) Whether occupiers, whose contractual arrangement with the land owner was under documents which described that arrangement as a licence, and who conducted a contract parking business on the site for more than a decade, were mere contractual licensees, or tenants, protected under the Landlord and Tenant Act 1954.
- The alleged misrepresentations as to the car park, and as to planning matters are two discrete topics, and I deal with them separately.
- The Second Defendant owned two large, contiguous buildings, which had ' formerly served as furniture warehouses. I refer to these hereafter as "the warehouses". The police maintain an active police station to the western side of the warehouses, whose only direct access onto a road is at the south-western corner of the site, onto a side street, Shepherdess Place. The buildings have the addresses 14-18 Nile Street, and 7 Shepherdess Place. They are very substantial structures, of some vintage, and are ripe for extensive reconstruction and development, while retaining their essential external shape. The relationship between the warehouses, and the car park site, owned by Hackney, to the eastern side of the warehouses can be seen best from the photograph at page 41 of the auction catalogue, and the photograph and plan at page 40. The address of the car park is 17-33 (or 35) Westland Place. The two sites are adjacent, with the car park running alongside the length of the two warehouses. To the eastern side of the car park, albeit at a slightly higher level (from the photographs the difference in level appears to be 2-3 feet) is a narrow pavement, and then Westland Place. Access to the car park from Westland Place is potentially considerably wider and easier than to the warehouses from Shepherdess Place. The car park itself is ripe for redevelopment. However, although the car park site is owned by Hackney, since 1988 it has been occupied by N.C.P. a well known company which operates many commercial car parks throughout the country.
- Originally the two vendors of the adjacent sites proposed to sell each as an individual lot, and the auction catalogue was prepared upon that basis, the warehouses forming Lot 45, and the car park Lot 46. However, before sale, upon advice, they joined forces, and an addendum to the catalogue was prepared, indicating that the two lots "are to be offered as one lot". The attractions of that course are obvious, not least that the car park could thus be used to obtain access to the warehouses, and for the storage of building materials and equipment, while construction work took place to the warehouses, the obvious method of working being to redevelop the warehouses first, and thereafter the car park. Further, a coherent development of the two sites together, would be potentially more attractive than their separate development. Vacant possession of the car park was important to any potential purchaser, not just for the purpose of redeveloping the car park site alone, but facilitating the development of the warehouses.
- Lots 45 and 46 were both described in the catalogue as "suitable for redevelopment", and it has been common ground throughout that this was so, and that the sale would attract potential purchasers who would redevelop both sites if they were successful at auction. Neither site, as it stood, had any real attraction to a potential purchaser, save for the prospect of redevelopment.
- On the site of the car park stood originally a row of houses, 17-33 (or perhaps 35) Westland Place. Those houses were demolished long ago, possibly as a result of enemy action in war time. A peripheral issue arose before completion as to whether No. 35 was included in the sale. That issue has no bearing upon the present litigation, and I do not deal with it further. The site was levelled, surfaced with tarmac, and marked into 36 bays, each of sufficient size to accommodate a single car or other light vehicle. The bays ran along the eastern and western sides, and the northern end. The central area was left unmarked, in order to facilitate manoeuvres by vehicles. A gate was erected at the only entrance, onto Westland Place. N.C.P. erected a sign, prominently displayed on a yellow background, bearing the legends "Westland Place Car Park" and "Contract Parking Only". There was no ticket machine, nor any hut, on the car park. I infer the agreement of August 1988, to which I refer in detail below, provided for the initial clearance of the site, and I infer that the physical arrangement of the site as a commercial car park was undertaken by N.C.P. when it commenced occupation in 1988, and that this was done with the express or implied consent of the owner. There is no evidence to suggest that the state or user of the car park in 1988 differed significantly from the position in 2000, and I infer that, when the 1988 agreement was made, both parties to it contemplated that the site would be cleared by N.C.P., and used for contract parking.
- N.C.P.'s occupation was the subject of contractual documents, the earliest being a letter dated 9th August 1988, signed on behalf of Hackney and N.C.P. (TB 104-6). The relevant passages are in these terms:-
"I refer to your letter of July (which has not survived) and our subsequent telephone conversation. I confirm that I am prepared to allow N.C.P. to occupy the above on a temporary licence basis on the following terms:-
1. The licence shall relate to the car park shown edged red on the attached plan, formerly known as Nos. 17-35 Westland Place.
2. The licence shall be personal to N.C.P. and cannot assigned or otherwise disposed of in whole or in part.
3. The licence will commence on Saturday 27th August 1988 and continue until Friday 24th February 1989. Consideration will then be given to the grant of a further licence in the light of the Council's development proposals for the site.
4. The fee payable for the licence will be two thirds of the gross parking receipts, net of VAT, in excess of £2,500, with an initial payment of £8,250 in advance.
5. The land is to be used for car parking and no other purpose.
6. The licensee shall indemnify the Council against any claims whatsoever arising as the result of the use of the land.
7. The licensee to be responsible for initial clearance of the site and for keeping the car park free from all rubbish and in a clean and tidy condition to the satisfaction of the Head of Valuation.
8. The licensee to be responsible for the payment of general and water rates, and for compliance with any other statutory obligation which may arise through use of the car park.
9. The licence shall rest upon an exchange of correspondence."
- That document does not include any express term that N.C.P. was to have exclusive possession of the car park. Nevertheless, given the nature of the arrangement, and of the use to which N.C.P. proposed (and did) put the site, it is an inexorable inference that N.C.P. should enjoy exclusive possession, to the exclusion of the freehold owner. The implication of such a term is necessary to give business efficacy to the arrangement, and also because it represents the obvious, but unexpressed, intention of the parties - see The Moorcock (1889) 14 PD 64 at 68 and Liverpool City Council -v- Irwin  AC 239, among many other authorities. If N.C.P. did not have exclusive possession, the vendor, a body with many employees working in the vicinity, would have been entitled to enter the site freely, and permit its employees and indeed others to do so, and thus allow them to park there. If this were the case, the whole commercial basis of N.C.P.'s occupation would have been destroyed. The financial terms to be met by N.C.P., and the requirement that it obtain an income stream by charging others to park on the site, necessitated exclusive possession.
- That being so, it is instructive to consider the 1988 agreement in the light of Street -v- Mountford  1 AC 809. Where the intention of the parties to create legal relations is not disputed (and there neither is, nor could be, any such dispute in this case), a tenancy, as defined by Law of Property Act 1925, s.205(1)(xxvii) is created if three "hallmarks" are present, namely exclusive possession at a rent for a term. If those three hallmarks are present, they are decisive, and a tenancy is created, save in exceptional circumstances, such as those referred to by Denning L.J. in Errington -v- Errington and Woods  1 KB 290. Such exceptional circumstances arise generally when the relationship between the parties goes beyond their interest in, or occupation of, the premises, for example when they are employer and service occupier. It is not suggested that such exceptional circumstances arise here. The fact that the parties have couched the documents that govern their relations in the language of licence, or that they have professed an intention to create a licence, rather than a tenancy, does not avoid the creation of a tenancy if the three hallmarks are present. Lord Templeman, at page 821D, put the matter in these terms
"Words alone do not suffice. Parties cannot turn a tenancy into a licence merely by calling it one. The circumstances and the conduct of the parties show that what was intended was that the occupier should be granted exclusive possession at a rent for a term with the corresponding f interest in the land which created a tenancy"
- The Rent Acts (or, here the Landlord and Tenant Act 1954), does not "alter or influence the construction of an agreement", but Lord Templeman warned that courts should be alert to "sham devices and artificial transactions" - an expression which he later amended to "pretence" - whose object was to disguise the grant of a tenancy, and thus evade the relevant statute.
- In the present case, two of the three hallmarks, a term at a rent, appear as express provisions of the contract documents. The third, exclusive possession, arises by f necessary implication to give business efficacy to the arrangement. It follows that all three hallmarks are present, and that, notwithstanding the language used, (e.g. "on a temporary licence basis") and paragraph 2 of the 1988 document, which purported to provide that the licence was personal to N.C.P. 10 and could not be assigned. The presence of the three hallmarks, and the consequent characterisation of the arrangement as a tenancy, negate the suggestion that the agreement was "personal". It would only be personal if the agreement did not confer the right of exclusive possession - see Street -v-Mountford at 824B-E.
- In A G Securities -v- Vaughan  1 AC 417, the House of Lords considered whether a tenancy or a licence had been created in a range of factual contexts in which the common feature was that there were several occupiers, each with a separate agreement with the landlord. Lord Templeman, at page 463C encapsulated the effect of Streeet -v- Mountford in these terms "Street v Mountford reasserted three principles. First, parties to an agreement cannot contract out of the Rent Acts. Secondly, in the absence of special circumstances, not here relevant, the enjoyment of exclusive occupation for a term in consideration of periodic payments creates a tenancy. Thirdly, where the language of licence contradicts the reality of lease, the facts must prevail. The facts must prevail over the language in order that the parties may not contract out of the Rent Acts."
- At 463H - 464A, Lord Templeman continued "My Lords, in Street v Mountford  AC 809, this House stipulated with reiterated emphasis that an express statement of intention is not decisive and that the court must pay attention to the facts and surrounding circumstances and to what people do as well as to what people say".
- The House of Lords revisited this topic in Bruton -v- London and Quadrant Housing Trust  1 AC 406. The appellant occupied one flat in a block, on written terms that were couched as a weekly licence, against the background that the owner intended to redevelop the site, but was willing to allow short term occupation pending redevelopment. The House of Lords rejected the argument, accepted by the Court of Appeal, that because the transaction had expressly proceeded on the basis that a licence was granted, no tenancy was created even though the appellant had exclusive possession. It was held that, in accordance with Street -v- Mountford, the existence of the three hallmark characteristics, including exclusive possession, created a tenancy. Lord Hoffmann said "The fact that the parties use language more appropriate to a different kind of agreement, such as a licence, is irrelevant if upon its true construction it has the identifying characteristics of a lease". A tenancy was created, notwithstanding that the housing trust, which had entered the agreement with the appellant, had allowed him into occupation of a flat, was itself a mere licensee of the council which owned the block of flats, a fact which the appellant knew, and from which he should have realised that the grant to him of exclusive possession probably constituted a breach of the housing trust's obligations to the council. This authority is decisive against any argument, (based upon the preamble, and clause 3, of the letter dated 9th August 1988 that governed relations between N.C.P. and Hackney) that no tenancy was created, because the parties intended only temporary occupation by N.C.P. in advance of redevelopment of the site for which (by inference) Hackney might require possession.
- My attention to Hinks -v- Fleet  2 EGLR 243. In that case, the relationship between a caravan owner, and the proprietor of a caravan park on which the caravan owner had stationed his caravan was held to be a licence, and upon that authority is based a passage in Woodfall at 1.023 "Similarly, under normal circumstances the right to park a car or station a caravan on land will be a licence rather than a tenancy, although there may be a bailment as well". No doubt that proposition is correct, for all that Hinks -v- Fleet did not concern a car, nor did it concern the distinction between a tenancy and a licence, but the very different question of whether there was a bailment, on the strength of which the caravan owner might recover damages for the theft of his caravan, which as a mere licensee he could not. The Defendants have argued, on the basis of that authority, that the agreement whereby N.C.P. was authorised to use an area for the commercial parking of a number of cars was similarly a licence. I do not accept that there is a sufficient parallel between the two matters. The arrangement between N.C.P. and Hackney in respect of this site only made commercial sense if N.C.P. had exclusive possession, whereas that does not necessarily follow in respect of an agreement to park a single car. Any individual who was authorised by N.C.P. to park a single car on the Westland Place car park probably had a contractual licence to do so, rather than a tenancy, but that point does not fall for decision.
- It follows that the 1988 Agreement created a tenancy, which continued, albeit with some variation of its terms, until the date of sale and indeed thereafter. By a letter dated 22nd March 1989 Hackney wrote to N.C.P. "I would remind you the licence in respect of the above expired on Friday 24 February 1989. Subsequently I would be prepared to renew the licence on the following terms". The terms that followed were identical to those of the 1988 agreement, save that:-
(a) paragraph 3 read "The licence will commence from 1st March 1989 and continue on a monthly basis, in view of the Council's development proposals for the site".
(b) paragraph 4 read "The monthly fee payable will be based on two thirds of the gross parking receipts net of VAT in excess of £416 subject to a minimum payment of £1,375".
(c) a new paragraph 10 was inserted:- "Termination of the licence will be effective upon one month's written notice by either party".
- In 1991, there was a further variation, whereby the notice period was increased to 3 months, and rent was to be "based on two thirds of the gross parking receipts net of VAT in excess of £5,000 p.a. but with a guaranteed minimum of £10,000 p.a. (reduced from £16,500 p.a.). None of these amendments affected the legal nature of the arrangement.
- The tenancy created in 1988 is a business tenancy, protected by Landlord and Tenant Act 1954, Part II. The parties cannot contract out of the statutory provisions - see s.38(1) - and any provision in the contract documents to that end is void, so far as they have that effect. A business tenancy is terminable by the landlord by notice pursuant to s.25, which requires a minimum period of 6 month's notice (contrast the 3 month contractual period in this case). It is not necessary to detail further the statutory procedure, but the overall protection given to a business tenant is much more considerable than a bare 3 month notice period. The Defendants have disputed whether a tenancy was created, but not the proposition that, if created, it was a business tenancy with statutory protection. "Premises", for the purposes of s.23 may include an open site without buildings upon it. This was decided by Cross J. in Bracey -v- Read  3 WLR 1194. That case concerned racing gallops, but Cross J. discussed the question of car parks, an example raised in argument, at p.1197.
- The car park and the warehouses were in separate ownership, but the owners, upon advice decided before the auction that, as the two properties were complementary, they should be sold as a single lot, although they appear in the auction catalogue as two separate items, lots 45 and 46. A suitable addendum was drafted and circulated. The vendors engaged Nelson Bakewell, to act on their behalf, and in particular to prepare for and conduct the auction. The two men principally concerned on behalf of Nelson Bakewell were Mr James Cannon and Mr Jonathan Emuss. Bircham Dyson Bell, a firm of solicitors, of which Mr John Stephenson was a partner was engaged to carry out the necessary legal work. The solicitors received their instructions via Nelson Bakewell.
- The process of preparing the catalogue for the auction, and the actions of Mr Cannon and Mr Emuss in advance of the auction, are illuminating. Matters of considerable interest are the manner in which they decided upon the form of words used in the catalogue to describe the car park arrangement with N.C.P., and the extent to which they communicated information to Mr Stephenson, the solicitor.
- Mr Cannon and Mr Emuss were aware from the outset that N.C.P. occupied the car park. I am satisfied that, from a very early stage, they appreciated that it was (at the very lowest) highly likely that N.C.P. had the benefit of a tenancy, protected under the Landlord and Tenant Act 1954, and that they appreciated that it was of considerable importance to any potential purchaser if this was so, as removal of N.C.P. from the site would be expensive, time consuming and uncertain if a tenancy existed. In consequence, had any potential purchaser (not just the Claimants), known or believed that there was a protected tenancy, he might well have evinced a reluctance to bid at all (thus avoiding "buying into trouble") or at least have reduced the amount of his bid to take into account the commercial impact upon him of the tenancy. Given that the existence of a tenancy (if such it was) would sterilise development of the car park, and hamper development of the warehouses, it represented a considerable "fly in the ointment" for Nelson Bakewell, anxious as they undoubtedly were to achieve a successful sale at a good price for their principals.
- The pages in the catalogue which related to Lots 45 and 46 (and indeed all other lots) were prepared and sent for printing before taking any legal advice as to the legal nature of N.C.P.'s occupation. It is plain from Mr Stephensori s statement, particularly at paragraphs 6-10, that this was so, and he is supported by the documents. His instructions, by email on 12th November (confirming a telephone call from the first Defendant on 11th November), were to prepare special conditions of sale. That email stated that the car park was being sold "subject to licence to N.C.P.". On 15th November, there was an exchange of emails in which Mr Stephenson requested copies of what he understood to be the licence. However, before he received any such document, on 17th November, he received, by separate letters, two copies of the auction catalogue, which had been mailed out to interested parties generally simultaneously with the copies sent to him. Only on 19th November, was there a request for advice, to which I turn later. Mr Stephenson gave oral evidence to that effect, which I accept. However, Mr Cannon at paragraph 10 of his witness statement, says "I discussed and agreed with John Stephenson the working (sic) for the description of the Lot to be inserted in the auction catalogue". His suggestion is that the relevant wording in respect of Lot 46 was a joint venture between Mr Stephenson and himself. Similarly, Mr Emuss at paragraphs 41-43 of his statement suggests that he sent the draft (i.e. for Lot 46) to Mr Stephenson, discussed it with him and with Mr Cannon, and "after they had both seen it sent it for approval to "the client". I reject the account given by Mr Cannon and Mr Emuss. It matches neither the documents sent before 16th November, when the auction catalogue was available for circulation, nor those that followed in the next few days. What would be the purpose of the request for advice on 19th November, if advice had been given some days earlier? Additionally, those inaccurate passages in their witness statements, and indeed oral evidence, are merely one aspect of a coherent course of unattractive conduct by Mr Cannon and (under his direction) by Mr Emuss.
- The relevant passages from the catalogue are these:
(a) the Auction Notices at page 3 (TB 83).
(b) the General Conditions of Sale, at pages 9-10 (TB 89-90).
(c) the full page description of Lot 46, with photographs and plans, at page 42 (TB 88).
(d) similar entries relating to Lot 45, at page 40-41 (TB 86-87).
- At page 42 of the catalogue, the relevant passages concerning the occupation of N.C.P. were these:-
(a) at the head of the page, in bold type, and highlighted by a rectangular box, were the words "Licence to N.C.P. Car Parks" and, on the next line, "Current minimum fee: £10,000 per annum".
(b) in a column to the right of the page were 10 paragraphs, each with a single word title in bold type and capital letters. The fifth of these, with the title "Tenancy" read as follows.
"The entire property is let to N.C.P. car parks on a monthly licence from 1 March 1989.
N.C.P. commenced occupation on a licence dated 27 August 1988 for 6 months. There was a further licence granted on 1 March 1989 to continue on monthly basis. The 1989 terms were amended on 10 December 1990 to allow both parties a three month period for notice of termination. The licence provides for N.C.P. to pay 66.66% of any receipts over £5,000 and a minimum rent of £10,000 per annum".
- The original draft for that page, prepared by Mr Emuss, subject to the approval of Mr Cannon, was in very different terms. Mr Emuss, at paragraphs 40-41 of his statement, deals with his method of drafting. In essence, he started with a computer template, drafted the relevant page, sent it by email to printers, and received it back by the same method, after they had worked on it. Thereafter, he produced a hard copy, enlarged it onto A3 paper, and made any necessary amendments, before the final version was printed up. The A3 version of the draft for Lot 46 was in the first of two Nelson Bakewell files put in evidence (NB 1). It is at page NB1/303. The contrast with the final version is of interest. There are two principal changes:-
(a) the original typed header read "Let to N.C.P. car parks. Current rent reserved £- per annum." The second line was scored out in manuscript, and the words "minimum rent £10,000" added in manuscript. The final version refers to a licence and a fee, rather than to "let" and "rent".
(b) in the right hand column, a sentence appears in typescript in the draft "The licence is personal to N.C.P. and cannot be assigned or otherwise disposed of in whole or in part." That sentence has been scored out in manuscript, and is not to be found in the final version.
- Mr Cannon conceded in evidence that he had suspicions that N.C.P. had the benefit of a tenancy protected under the 1954 Act. So did Mr Stephenson. The catalogue went to print while enquiries were being made by Nelson Bakewell as to the basis of N.C.P.'s holding, and to assemble such material as might exist in respect of it. The representations in the catalogue were made when each of them believed that the enquiries were incomplete, and it was at least theoretically possible that material might emerge which demonstrated that N.C.P. had a licence - for example, material demonstrating that N.C.P.'s possession was not exclusive of the owner - although that possibility appears, with hindsight, to be rather remote.
- On 17th November (NB 2/76) Mr Cannon sent to Stuart Cunliffe, a director in the investment division of Nelson Bakewell, an email, the first sentence of which read "They (i.e. N.C.P.) have told Hackney that they want to surrender their licence as they are not making enough money". Mr Cunliffe responded by email the same day, sent to Mr Cannon and Mr Emuss. This read "John Theophilus of N.C.P. has expressed some interest in the above. He is a valued client so can you make sure that you keep him up to date with the sale. We wouldn't want him to miss an opportunity to buy it." Two days later, on 19th November (or conceivably on the day before) Mr Emuss spoke by telephone to Mr William Ottley of N.C.P. In consequence of that telephone conversation, Mr Emuss sent Mr Ottley a copy of a planning guidance document under cover of a letter dated 19th November (NB 2/79).
- More significantly, on the same date, 19th November, Mr Emuss typed and signed a letter addressed to Mr Stephenson. That document is at NB 2/90. In its original form, the latter part of it read as follows:-
"I have had a telephone conversation with William Ottley of N.C.P. (telephone number given). Mr Ottley indicated that N.C.P. would be interested in purchasing the site. He also indicated that N.C.P. have taken legal advice and have concluded that they are of the opinion that they have Landlord and Tenant rights under the 1954 Act.
I enclose file correspondence from Hackney dated 9 August 1988 setting out terms for the occupation of the car park licence.
I suspect N.C.P. are positioning for some sort of compensation. (Care needs to be taken as N.C.P. are valued clients of Nelson Bakewell). It is essential that we clarify this issue immediately."
- Had the letter been sent to Mr Stephenson in that form, it would have alerted him to the stance N.C.P. had taken on legal advice. He remained in ignorance of this until after this trial commenced. This is plain from paragraph 11 of his statement "However, there was equally no evidence that N.C.P. had actually claimed a tenancy or indeed, if they had not, whether or not they would in fact do so". His ignorance of this important information is also evident from his dealings with Mr Skevington, a potential purchaser (to which dealings I return below) and from the passage at the end of paragraph 23 "...did not wish (as one would have expected) to do anything which might encourage N.C.P. to do so (i.e. assert a tenancy) if they had not yet thought of the possibility themselves". All reference to N.C.P.'s stance, and to Mr Emuss' view that N.C.P. sought compensation, was deleted in manuscript, apparently by Mr Cannon, and the version actually sent to Mr Stephenson made no reference to those matters. What remained was an anodyne request for confirmation that N.C.P. still had a licence, and that no adverse rights (which in context plainly meant a tenancy) had been created.
- Among other documents sent by Mr Emuss to Mr Stephenson on 19th November 1999, was a note, hand-written in capital letters (NB2/81). At its head appeared the name John Carlton, who works for the Metropolitan Police. It recited briefly the N.C.P. contractual documents, and then read: "The length of occupation suggests N.C.P. have 1954 Act protection and would be entitled to compensation for disturbance. This will need to be confirmed by Legal Services". Shortly thereafter there is this further passage: "If N.C.P. have Landlord and Tenant rights then vacant possession will have to be obtained by the Met. Police and any disposal valuation would have to reflect compensation, income receivable and any other factors affecting the site"'. The author of that note (apparently not Mr Cannon or Mr Emuss), had plainly concluded that N.C.P. had a protected tenancy, although he grounded that conclusion (inaccurately) upon length of occupation, rather than construction of the contractual documents in their factual contexts. There is no indication as to whether "Legal Services", which I take to be an in-house legal department of Hackney or the Second Defendant, ever considered the matter or, if so, to what effect. Interestingly, the author's view was that, if a tenancy existed, it would be for the vendors to obtain vacant possession before sale, the inference being that sale of the property subject to a protected tenancy would be unattractive, the obvious reason being that potential purchasers would be deferred. Given the reference to "Met Police", which body did not own the car park, but the warehouses, it may be that this note was created internally by the Second Defendant, rather than the first. Mr Emuss and Mr Stephenson plainly each had a copy of this note well before the auction. I infer that Mr Cannon must also have seen it, as there were few secrets between him and Mr Emuss in respect of the auction. Mr Stephenson in evidence said he did not know who wrote the note. So did Mr Cannon, who claimed that he had not seen it before. Mr Emuss said that he inferred the handwriting was that of Mr Carlton, although Owen Lynch was a possible author. No real explanation as to how that note had been created, how it had come to the hands of Mr Emuss, or why it had been passed on to Mr Stephenson, was forthcoming from any quarter. That note was a very plain warning of the existence of the protected tenancy, and apparently an indication that this was the view of the Second Defendant itself, not just its external agents. It adds to the clear picture that Mr Cannon and Mr Emuss in particular knew perfectly well that this must be a tenancy, that this would adversely affect the proposed sale, and that they must avoid "the penny dropping" with potential purchasers as to the true position.
- When this run of correspondence is put together with the drafting amendments to the catalogue, the only sensible conclusion is that both Mr Cannon and Mr Emuss held the view that this was a tenancy, and that N.C.P. knew as much, and intended to assert that this was so against the eventual purchaser. Further, I am satisfied that the purpose of withholding this information from Mr Stephenson was in the hope that he would lend himself to the proposition that this was only a licence, which they gauged he was considerably less likely to do if he knew the information that Mr Emuss had gleaned from N.C.P. I am further satisfied that the reason that Mr Cannon and Mr Emuss drafted the relevant page of the auction catalogue, dealing with Lot 46 as they did, was against that background. They wished to lull potential purchasers into the belief that there was no tenancy, and to do so in terms which they hoped would provide them with a degree of protection when the balloon (as they knew was inevitable) went up after auction, when the eventual purchaser sought possession of the car park from N.C.P. By that stage, they gauged that the transaction would have been completed, and that they could wash their hands of any complaint from the dissatisfied purchaser.
- Further, this conclusion is strengthened by the fact that Mr Cannon and Mr Emuss, particularly the former, have considerable experience in the field of commercial property, and significant working knowledge of the principles of law that are relevant to it. Neither of them has suggested in evidence any sensible basis upon which they considered this to be a licence, rather than a tenancy. Mr Cannon, in cross-examination, said that "I had my suspicions". In a later passage he said "I was suspicious that they (i.e. a tenancy) might have been created. I was not sure. I was very suspicious that one might have been created". In a later passage, he said that "the evidence was insufficient for him to say definitely. It was very difficult to say one way or another." Such concessions destroy any defence, based on Misrepresentation Act 1967, s2(1) to the effect that the Defendants, through Mr Cannon, believed that there was a licence. Mr Cannon could have held no such belief, when he was suspicious that the opposite was the case, and regarded the material available to him insufficient to tell "one way or the other'. That conclusion arises from taking those concessions at face value. I am satisfied from the relevant evidence as a whole that his true state of mind was virtual certainty that this was a tenancy.
- This was not the first time that Mr Cannon had been confronted by the question, in relation to a commercial property sold by him in Shoreditch, of whether the occupiers of a car park were protected tenants or licensees. As he accepted in cross-examination, that question had arisen fairly recently in respect of a property known as Murray Grove, in which the occupiers of 30 or more years' standing asserted that they were protected tenants. That assertion had apparently been dealt with by the issue of an addendum to the auction catalogue, after the occupiers, according to Mr Cannon, had "provided sufficient evidence that there might have been a tenancy". Mr Cannon said "We had been cautious and issued an addendum". It is plain that Mr Cannon had his experience in respect of Murray Grove well in mind when dealing with the same issue in respect of Lot 46.
- Mr Cannon had sent a revealing email on 22nd October to Mathew Stone, a director of Nelson Bakewell. Its text is at NB1/391-2. The whole paragraph at page 391, commencing with the word licence is significant. He began with the words "The entire property is on licence to N.C.P.", and then gave some details of the payment history, but went on in these terms "... I have taken this from an exchange of letters so the current position may be different. There may be an issue similar to Murray Grove where the licence may have been converted into a lease because of the length of time it has been standing without documentation". A copy of that email went to Mr Emuss.
- Notwithstanding that unpromising beginning, Mr Emuss asserted in evidence, when his attention was drawn to the email of 21st October "I was never of the opinion that there was a lease for Murray Grove". I do not accept that suggestion. I am satisfied that Mr Emuss' state of mind, and knowledge, was essentially the same as that of Mr Cannon, although Mr Emuss made less concession in evidence to that effect than did Mr Cannon.
- Mr Stephenson plainly spoke to Mr Cannon about N.C.P.'s occupation after the catalogue was distributed, but in advance of preparation of the special conditions of sale (which were only sent out to potential purchasers two days before the auction). At paragraph 11 of his witness statement, he said "I recall that Mr Cannon and I were both of the view that if N.C.P. were still occupying under those arrangements it was possible by now that even though they were described as a licence they might have acquired a tenancy at law". He went on to say that there was no evidence that N.C.P. had claimed, or would claim, that there was a tenancy, an assertion only possible because he had been kept in ignorance of N.C.P.'s stance by Mr Cannon. He asserts in the same paragraph "My recollection is that in factual terms, since the documents were described as licences we believed the catalogue was correct". I reject that assertion. It does not represent Mr Stephenson's true belief as to the nature of N.C.P.'s occupation, nor does it represent a sensible approach to the construction of the catalogue, or its impact upon purchasers. The reality was that Mr Stephenson was content that the catalogue, circulated without any contribution by him to its drafting, should remain unamended, notwithstanding that his true belief was that this was a tenancy. In evidence, he said that the matter seemed to him "by no means certain', and that possibly with exclusive occupation it could be a tenancy protected under the 1954 Act. He had a clear recollection of telling Mr Emuss of his view, although he could not recall the exact words. He said that it was possible that "1954 Act rights" had been inadvertently created. He did not enquire as to the fact of N.C.P.'s occupation over a 10 year period. His instructions from the First Defendant came via Nelson Bakewell. He said he asked what was the current basis of N.C.P.'s occupation. He was plainly aware of Street -v- Mountford, and had some working knowledge of its import, he was unable to give any explanation that I regarded as satisfactory, coming from a lawyer specialising in commercial property transactions, as to any sensible basis upon which the true legal nature of the arrangement might be anything other than a protected tenancy. His hesitant suggestion that the parties might have "agreed an intention not to create" a tenancy is at odds with Street –v- Mountford. I have come to the conclusion that he did not believe that this arrangement was in reality a licence, but believed it was virtually certainly a protected tenancy, but did not exhibit sufficient professional independence to ensure that any potential purchaser had material before him which made the true position crystal clear. Instead, taking comfort in what he regarded as the overriding status of special conditions, he drafted special conditions. These did nothing to rectify the false impression given by the catalogue.
- The relevant provision of the Special Conditions of Sale was paragraph 5, which reads thus: "The property is sold subject to and with the benefit of the rights of National Car Parks Limited pursuant to a letter dated 22nd March 1989 (following upon a letter of 9th August 1988) as amended by a letter dated (approximately) 10th December 1990. Copies of the 1988 and 1989 letters and of the relevant extract of the 1990 letter have been supplied prior to the action and the Producer shall raise no requisitions in respect thereof. The current licence fee is [ ]".
There is nothing to indicate that the representor regarded the legal effect of the documents as doubtful, or that they constituted, or might constitute a protected tenancy nor that it was for the reader to make his own enquiries, rather than rely on the representations.
- The first paragraph of the auction notices inserted in the catalogue, would have impressed upon the reader the opposite proposition, namely that those who had prepared the catalogue had done so in such a manner that, by inference, no independent checking of the accuracy of the information in the catalogue was necessary, or indeed possible. That paragraph reads "The details of each particular lot have been prepared using information supplied by the vendor and their solicitors. Every effort has been made to ensure the accuracy of the details and to verify the information supplied". Those propositions did not accord with the harsh reality of the manner of preparation of the catalogue detail for Lot 46.
- One criticism raised against the Claimant in this action is that he should have been more active in enquiring about N.C.P.'s occupation, either directly from N.C.P. or from the vendor's solicitor, Mr Stephenson, who was in attendance at the auction, and (it is asserted by the Defendants) was ready to answer any reasonable enquiry fully and truthfully. As to direct enquiry of N.C.P., I regard as fanciful the suggestion that Nelson Bakewell anticipated that a string of potential bidders, one of them the Claimant, would direct enquiries to N.C.P. as to its interest in the car park, or that the Claimant is to be criticised for not taking that step. The replies to the preliminary enquiries were arguably inconsistent with one another. In response to question 17.1, which requested the name and address of each current tenant, N.C.P.'s name and details were provided, but at reply 18.1, there was reference to "the current minimum licence fee", and at 19.1, in response to a request for copies of all licenses granted, the reply was "none save for the letters of which copies have been supplied" - plainly a reference to the N.C.P. contract documents. It is plain that neither the Claimant nor his solicitor were alerted by these replies to suspect that anything was amiss with the catalogue description of the N.C.P. arrangement, and these replies were not in terms that negated the catalogue representations. What about Mr Stephenson? Indeed, a potential purchaser, Mr Skevington did raise a query as to the car park after receiving the relevant legal pack. The passage of arms between Mr Skevington and Mr Stephenson is set out at paragraphs 22-23 of Mr Stephenson's witness statement, although the parallel that I draw between Mr Skevington and the Claimant is rather different from the one suggested by Mr Stephenson.
- Mr Skevington's question was "Has N.C.P. ever claimed benefit of the Landlord and Tenant Act 1954?" That query was raised before the day of the auction. The accurate answer to that question would have been "Yes". Even upon Mr Stephenson's account, he had no information from Nelson Bakewell or London Borough of Hackney one way or the other as to the answer to this question. He had, as I accept, been kept in ignorance of information that Mr Emuss had received from Mr Ottley of N.C.P. Mr Stephenson professed willingness to answer queries - see paragraph 25, where he says in respect of the Claimant, "I was as ready to answer any queries he may have had ... as I was with Mr Skevington". Mr Skevington's question was a pertinent one, to which Mr Stephenson did not himself have the answer. In those circumstances, one would have expected Mr Stephenson to telephone Mr Cannon or Mr Emuss to obtain the answer, and then relay it to Mr Skevington. Alternatively, if time was I pressing, he could have obtained the answer from them in the Ballroom on the occasion of the auction itself. He made no such enquiry, but fobbed off Mr Skevington and his solicitors with the telephone response that he would not answer their queries in writing, but would do so on the occasion of the auction. Mr Stephenson does not suggest that Mr Skevington was ever given an answer.
- Had the Claimant raised the matter with Mr Stephenson, he would have received, at best, the same response as did Mr Skevington, namely no information as to N.C.P.'s stance, as communicated by Mr Ottley to Mr Stephenson, and in all likelihood no straight answer at all.
- The auction itself was filmed by video camera, apparently for training purposes. Mr Cannon was the auctioneer, and on the video he can be seen and heard describing N.C.P.'s interest in these words "Plus the car park currently licensed to N.C.P.". The purchasers do not base any claim on that remark, as the Claimant may well not have arrived at the auction by that stage, but in any event does not suggest that he heard those words
- I turn to the question of construction of the catalogue and, more particularly, the representations as to the status of N.C.P. It is argued that the repeated use of the word licence is no more than an accurate reflection of the language in which particular documents are couched, and is thus an accurate representation. I reject that argument. The word "licence" is repeatedly used to represent the true legal characterisation, not just of particular documents taken in isolation, but of those documents in their true factual context. Construction of such documents without regard to their factual context is a sterile academic exercise. What a potential purchaser needs to know, and what was represented here, is the legal nature and effect of the whole arrangement between the parties, of which these documents are only one aspect, albeit an important one. Further, the vendor knew, or could ascertain, but the potential purchasers could not, the full facts of the relationship between N.C.P. and the vendors. I deal with the authorities on that topic later in this judgment. In fact, upon a true construction of the representations in the catalogue, the vendors represented that the arrangement between N.C.P. and Hackney, construed in the context of its factual setting at the time of contracting, had the legal character of a licence, and was terminable upon three months' notice. The overall effect of the entire description of the arrangement needs to be considered, and it is noticeable that there is no reference to the Landlord and Tenant Act 1954, nor any suggestion that any document constituted, or might constitute a tenancy when set in its factual context, nor that the reference to three months' notice was no more than a recitation of a passage in a contractual document, whereas the true interest of N.C.P., could not be terminated, nor could vacant possession be gained upon such notice. Taken overall, the catalogue entry which describes N.C.P.'s occupation is at best a half truth. The omissions of relevant matters falsify what is expressed, although the falsity of the representations can fairly be put on the stronger basis that the representations are inconsistent with the reality. In the present case, the appropriate fraction of truth may not be a half, but only a quarter, or indeed less. Further, the thrust of the representation is not avoided by the use of the word "Let" in the sentence "the entire property is let to N.C.P. car parks on a monthly licence from 1 March 1989, nor by the single word "tenancy" at the head of the relevant paragraphs. That word, viewed in the context of the catalogue as a whole, was no more than a generalised, non-technical expression. It derived from the computer template. It was used as a title in respect of every entry, for every lot in the catalogue, in which any nature of occupation or interest (of whatever nature) of any person other than the vendor was set out.
- It follows from this analysis that the true legal character of N.C.P.'s interest was a business tenancy, protected under Landlord and Tenant Act 1954, whereas it was falsely represented in the catalogue as a contractual licence. There was thus a misrepresentation.
- The defendants argue that the misrepresentation was as to law, not fact, and that there is a long established rule that no action lies for a misrepresentation of law. The leading academic authors regard that as a debatable proposition, awaiting reconsideration in the light of the decision of the House of Lords in Kleinwort Benson Ltd -v- Lincoln City Council  2 AC 349. Passages to this effect are to be found, for example in Treitel on Contract at 308; Virgo: The Principles of the Law of Restitution (1999 ed. 182-183; Hedley: Critical Introduction to Restitution (April 2001 ed.) at 207; and Chitty on Contract (28th edn), 6-011.
- In Kleinwort Benson, the House of Lords held that "the rule precluding recovery of money paid under a mistake of law could no longer be maintained". Does the "misrepresentation of law" rule survive that decision? As a preliminary, is it for me to consider the matter at all, or am I bound, as a judge at first instance, by the line of authorities that underpins the "misrepresentation of law" rule. The answer, in my judgment, lies in Young -v- Bristol Aeroplane Co Ltd  1 KB 718, in which the Court of Appeal analysed the question of whether or not it was bound by its own previous decisions, and those of courts of co-ordinate jurisdiction. The third category identified was "where this court comes to the conclusion that a previous decision, although not expressly overruled, cannot stand with a subsequent decision of the House of Lords". The court held that it was bound to refuse to follow such a previous decision of its own. Similarly, in my judgment, a judge at first instance is bound to consider whether previous decisions, that would otherwise be binding upon him, can stand with a subsequent decision of the House of Lords, and if he concludes that they cannot so stand, he is bound to refuse to follow them, but to place his reliance on the recent decision of the highest tribunal.
- It would be singularly inappropriate to paraphrase the speech of Lord Goff of Chieveley, by which the "mistake of law" rule received its quietus, but I draw attention briefly to these features. As he makes plain, the origin of that rule was Bilbie -v- Lumley (1802) 2 East 469, and its jurisprudential grounding was in the proposition "every man must be taken to be cognisant of the law", and in the maxim "ignorantia juris non excusat". Although "the rule hardened" it only applied where money was paid with full knowledge of all the facts - see Kelly -v- Solari (1841) 9 M&W 54. Its demise became inevitable once there was recognition of "a coherent law of restitution founded upon the principle of unjust enrichment ... and recognition of the defence of change of position".
- As to the origins of the "misrepresentation of law" rule, Sir G Mellish L.J. said in Beattie -v- Lord Ebury [LR] 7 Ch. App. 777 at 802 said that "although I have found no case at law, there is a case in equity which clearly shows that a person cannot be made liable for making a misrepresentation unless it is a misrepresentation in point of fact, and not merely in point of law". That authority was Rashdall -v- Ford [LR] 2EQ 750, from which the decision of the Court of Appeal in Chancery, Beattie -v- Lord Ebury and subsequent authorities derive. In Rashdall -v- Ford, Sir W Page Wood, V.C. refers to a loan made in consequence of a misrepresentation of law as "a case extremely analogous to that of a payment made by a man in alleged ignorance of the law", and appears to arrive at his conclusion that there should be no relief in respect of misrepresentation of law, by analogy from the "mistake of law" rule. He cites no earlier authority for the "misrepresentation of law" rule. Professor Treitel, at p.308 of his work, independently draws attention to the analogy, in this passage: "The House of Lords has recently held that mistakes of law, no less than mistakes of fact, can give rise to a claim for the return of money paid under a mistake. Such a claim is analogous [my emphasis] to one for the return of payments made under a contract which has been rescinded for misrepresentation, so that there is now a strong case for reconsidering the effects of the distinction in the context of restitution claims based on misrepresentation".
- In Rogers -v- Ingham (1876) 3 Ch. D. 351, the "mistake of law" rule was applied, but passages in the judgment of James L.J. at p.355 and Mellish L.J. at pp.357-8, make it plain that it did so only where there was "perfect knowledge of all the facts common to both". If both parties did not have such knowledge, the implication was that relief might be given. Passages in the judgment of Buckley J. in Beesly -v- Hallwood Estates Ltd  WLR 549 are to the same effect, see p.560, at which he delineates a mistake of law as "a mistaken view held by all the parties that on the known facts the option was binding at law irrespective of registration ... but all the other relevant fact were known. The mistake was as to the nature and effect of the general law applicable to those known facts". In Smith -v- Land and House Property Corporation (1884) 28 Ch. D. 7, there are passages in the judgment of Bowen L.J. to the same effect, in his consideration of the boundary between a statement of opinion and one of fact. He said, at p.15 "but if the facts are not equally known to both sides, then a statement of opinion by the one who knows the facts best involves very often a statement of a material fact, for he impliedly states that he knows facts which justify his opinion. Now a landlord knows the relations between himself and his tenants, other persons either do not know them at all or do not know them equally well ...". These authorities provide definitive guidance if it proves necessary for me to draw the boundary between law and fact in the present case. The vendors, and their agents, had (or could obtain) full knowledge of the arrangements with N.C.P., whereas the Claimant did not and could not do so. Implicit in the catalogue description of various documents as "a licence" was a representation that they knew of facts which justified the use of that term, and indeed that the full facts of N.C.P.'s relationship with the Second Defendant were such that, upon application of the general law to those facts, that relationship was a licence.
- Support for the Claimant's case, on the same theme, is to be found in The Lucy  1 Lloyd's LR 188 at 198, where a document, a copy of the head charter, was delivered. Mustill J. said "it is, however, clear that in the present case Hallam were interested in the head charter because they were concerned to know about the bargain between Atlantic and the owners, which, they reasonably took for granted, is what the charter embodied. What they wanted was a document reflecting the whole bargain, not part of it. If, as so often happens, the charter had been qualified by a side letter, it would have been misleading to send the charter without the letter. There was nothing here so straightforward as a side letter. Nevertheless, by not drawing attention to the true position as between the owners and Atlantic, the latter mislead Hallam into thinking that the head charter could be taken at its face value ... there was in my view an implied misrepresentation".
- In Andre and Cie S.A. -v- ETS Michel Blanc & Fils  2 Lloyd's LR 427, the Court of Appeal was concerned with a misrepresentation as to foreign law. It held that a representation as to foreign law was a representation of fact. Lord Denning MR, at p.430, said "the distinction between law and fact is very illusory. It is so difficult to define that I hope that the time will soon come when it will be disregarded. It does not apply here for several reasons." A little later, he continued "... it seems to me not to be a misrepresentation of the general law, even of the United States. It is a misrepresentation as to private rights in the United States and comes within the dictum of Lord Westbury in Cooper –v- Phibbs (1876) 2 LR HL 149 at p.170. The real reason why in former days misrepresentations of law were accepted was because both parties were supposed to have equal access to the law and to have equal knowledge thereof. That appears from the case of Bilbie -v- Lumley (1802) 2 Ea. 469. But that has been exploded long ago. It is not right to say that everyone is presumed to know the law. It is very proper, therefore, that the distinction between law and fact should soon be abandoned."
- Lord Westbury's dictum in Cooper -v- Phibbs was this "it is said "ignorantia juris haud excusat", but in that maxim the word "jus" is used in the sense of denoting general law, the ordinary law of the country. But when the when the word "jus" is used in the sense of denoting a private right, that maxim has no application. Private right of ownership is a matter of fact; it may be the result also of matter of law; but if the parties contract under a mutual mistake and misapprehension as to their relative and respective rights, the result is that that agreement is liable to be set aside as having proceeded upon a common mistake".
- Lawton L.J., giving the second judgment in Andre, said that "A mis-description as to the existence of a right is a misrepresentation of fact". He found it unnecessary to decide whether the word "misrepresentation" occurring in the Misrepresentation Act 1967 meant a misrepresentation of fact, but for the purposes of his judgment was prepared to accept that it did. Lane L.J. said "at common law a misrepresentation of law, unless made fraudulently was never a ground for even the limited relief available to those who had been misled. Although the basis of that rule is not easy to find, there is no reason that I can see for altering that rule under the terms of the Act. I must respectfully dissent from the view that the Act applies equally to misrepresentation of law and to misrepresentation of fact". Later he said "it is not clear, as I have said, what the rationale is behind the common law's exemption of misrepresentations of law, but it is to my mind an exemption not to be extended".
- I have concluded that the "misrepresentation of law" rule has not survived the decision in Kleinwort Benson Ltd -v- Lincoln City Council (supra). Its historical origin is as an off-shoot of the "mistake of law" rule, created by analogy with it, and the two are logically inter-dependent . Both are grounded in the maxim "ignorantia juris non excusat", a tag whose dubious utility would have been enhanced, had it gone on to explain who was not excused, and from what. As it stands, it means no more than that ignorance of the general law does not excuse anyone from compliance with it, a proposition with which criminal lawyers are familiar. In translation, it has become distorted and amplified in meaning, in such expressions as "everyone is taken to know the law", from which follow two further propositions, (underpinning the "mistake of law" and "misrepresentation of law" rules respectively) (i) "as you are taken to know the law, it is your own fault if you are mistaken as to it, and because of that you should have no relief" and (ii) "as you are taken to know the law, it is your own fault if you are mistaken as to it, even if I have misrepresented it to you, and because of that you should have no relief". Those two propositions bear little relation to, and do not follow logically from, the maxim "ignorantia juris non excusat", but save for its Latin roots, no basis for the "misrepresentation of law" rule is to be found, as Lane L.J. remarked in Andre. The distinction between fact and law in the context of relief from misrepresentation has no more underlying principle to it than it does in the context of relief from mistake. Indeed, when the principles of mistake and misrepresentation are set side by side, there is a stronger case for granting relief against a party who has induced a mistaken belief as to law in another, than against one who has merely made the same mistake himself. The rules of the common law should, so far as possible, be congruent with one another, and based on coherent principle. The survival of the "misrepresentation of law" rule following the demise of the "mistake of law" rule would be no more than a quixotic anachronism. Its demise rids this area of the law of a series of distinctions, such as the "private rights" exception, whose principal function has been to distinguish the "mistake of law" rule, and confine it to a very narrow compass, albeit not to extinguish it completely.
- I return to the misrepresentation as to the nature of N.C.P.'s interest in the car park. It follows from the fall of the "misrepresentation of law" rule that this misrepresentation is actionable (assuming that all other legal requirements are satisfied). Even had the "misrepresentation of law" rule continued in existence, it would not have availed the Defendants in this particular case, as the misrepresentation was as to (a) private rights and (b) the sub-stratum of fact to which the general law had been applied.
- I turn to chart the progress of the Claimant towards the auction. He had a quarter of a century's experience, with his wife, as a property developer, using the business names "Westbury Homes" although he did not shelter behind limited liability. He had previously purchased another property in the Shoreditch area from the First Defendant. There was a flurry of minor issues as to whether the Claimant, or his son contacted Nelson Bakewell to obtain a catalogue. Resolution of those issues appears to be of little significance, although the position appears to be that on or about 18th November, the son arranged for a catalogue to be sent to his father thus explaining the entry of that date in the Schedule of Serious Interest. The father appears to have been abroad at that date. The Claimant undoubtedly visited the site more than once in November 1999.
- More to the point, the Claimant plainly received and studied the auction catalogue well in advance of the sale. He also had the Planning Guidelines prepared by Mr Morrisey. According to the joint recollection of his solicitor, Mr Cunningham, and the Claimant himself, there was an extensive telephone conversation between the Claimant and Mr Cunningham on 6th December (2 days before the auction), and a substantial meeting that evening at the Claimant's home. By this time, the Claimant had received the auction catalogue and the legal pack for Lot 45, but not the legal pack for Lot 46, which was only posted to him, at earliest, on 6th December.
- The degree of attention given by the Claimant to the matter was no doubt proportionate to the fact that he intended to, and did, bid not far short of £4 million to purchase the combined lot, having arranged borrowing to fund the purchase. On any view, this was a very substantial investment for two private individuals to make. Mr Cunningham had acted regularly for the Claimant on a number of property transactions. The Claimant had spotted, in the legal pack for Lot 45, a copy of a local land charges search which suggested that planning consent had already been obtained for residential development of part of the property about to be auctioned. That search in fact related to a quite different, and irrelevant, property. As the Claimant was concerned that others might not pick up the mistake, and thus bid higher against him in the mistaken belief that there was existing residential planning consent, he raised the matter with Mr Cunningham, who wrote raising the matter and describing it as a misrepresentation. I regard the point taken by the vendors on the strength of this complaint, namely that it demonstrates that the Claimant was rather too free with allegations of misrepresentation, as misconceived. The vendors were, (no doubt in genuine error), making a misrepresentation that there was extant planning permission that related to the property for auction, and the raising of this point by the Claimant does not cast doubt on the Claimant's good faith in complaining of misrepresentation as to the car park.
- The precise time of arrival of the legal pack for Lot 46 at the Claimant's address is unclear. It was posted to him no earlier than 6th December, two days before the auction. The Claimant says, with justification, that in the days leading to the auction he was extremely busy with his bankers, and not generally in the office. He says that he did not see the legal pack for Lot 46 before the auction, although he appears to concede that it may have arrived at his office before the auction took place.
- The Claimant's account, which I accept as both truthful and accurate, is that he relied upon the account of N.C.P.'s occupation given in the auction catalogue. He says that he took it to be an agreement for a licence, which he could terminate (if he purchased) on three months' notice, and thus cause N.C.P. to vacate the car park. He said "I just went by their brochure". "I was of a very clear understanding that it could be vacated on three months' notice". He said that during his discussions with Mr Cunningham, both of them took it to be a licence terminable on that basis, and that they never discussed that there could be any risk of "getting N.C.P. out" (sic).
- In essence, the Claimant asserts that he took the catalogue description of Lot 46 at face value as a representation that N.C.P.'s occupation could be terminated on three months' notice. He says, and I accept "It never occurred to me that N.C.P. might have a protected tenancy". The Claimant is not a lawyer, and his understanding of the term "licence" is perhaps not extensive, but he well understood the significance of a protected tenancy, and the contrast between a licence and a protected tenancy. He was lulled into a misunderstanding of the true position by the wording of the catalogue, or - to use blunter language - he walked into the trap set by Mr Cannon and Mr Emuss. That wording, and its repetition of the term "licence", masked a protected tenancy, and in my view had been deliberately used in order to do so. My assessment is that, had the Claimant appreciated that N.C.P. had a tenancy, or that such was the probable position, it would have been for him, as for most other potential purchasers, a most material consideration, which would have affected his decision as to whether to bid, and the price at which he did. He would have taken advice from Mr Cunningham, and I regard it as highly likely that, had he and indeed his bankers been alert to the true position, he would not have been willing to take the considerable risk that N.C.P. might prove difficult and/or expensive to "get out", and that there would have been a real risk that his bankers would not have let him do so, even had he been willing.
- I have concluded that the Claimant was induced to purchase by the misrepresentation, and that it was reasonable for him to rely upon it. No further information relevant to the question of whether this was a protected tenancy or a licence was reasonably available to him, and the fact that he was not alert to the possibility of a protected tenancy resulted from the impact of the misrepresentation upon him. He only had access to the N.C.P. contractual documents at the auction itself, and the auctioneers plainly anticipated and intended, notwithstanding the warnings in the auction notices at the beginning of the catalogue, that there would be competitive bidding for the combined lot, even though the auctioneers had made it very difficult for such potential bidders to obtain effective legal advice before doing so, by sending out the legal pack for Lot 46 so late, by the misrepresentations in the catalogue, and by the reluctance of the vendor's solicitor to give direct answers to probing questions on the topic, as evidenced by his dealings with Mr Skevington. The topics of materiality of the representation, inducement and reliance, are dealt with by Scott L.J. in Museprime Properties Ltd -v- Adhill Properties Ltd  2 EGLR 196 at 201M-202A. "A representation is material, in my opinion, if it is something that induces the person to whom it is made, whether solely or in conjunction with other inducements, to contract on the terms on which he does contract. I would gratefully adopt the view expressed in Goff and Jones on the Law of Restitution, 3rd ed. at p.168, which reads:
In our view any misrepresentation which induces a person to enter into a contract should be a ground for rescission of that contract. If the misrepresentation would have induced a reasonable person to enter into the contract then the court will, as we have seen, presume that the representee was so induced and the onus will be on the representor to show that the representee did not rely on the misrepresentation either wholly or in part. If, however, the misrepresentation would not have induced a reasonable person to contract, the onus will be on the representee to show that the misrepresentation induced him to act as he did. But these considerations relate to the onus of proof. To disguise them under the cloak of "materiality" is misleading and unnecessary. And as the learned editors say a little way above that passage; the cases have tended to treat materiality as synonymous with inducement".
In my judgment, this misrepresentation would have induced a reasonable person to enter the contract to purchase the property. Even if that were not so, and the onus of proof lay on the Claimants to show that the misrepresentation induced them to act as they did, I am satisfied that they have discharged that onus to the requisite standard, namely on the balance of probabilities. I note also The Siboen and the Sibotre  1 Lloyd's LR 293, at 324, column 1.
- For a Claimant to establish that there has been a misrepresentation, its falsity must be proved, on the balance of probabilities, by an objective comparison between the representation and the reality. It is not sufficient, as suggested by the Claimant (for example, at paragraph 7 of the Particulars of Claim) that N.C.P.'s claim to have a tenancy appears to be correct. The Claimant must establish, on the evidence before this court, that there was in fact a tenancy. As I have indicated above, it has succeeded in doing so.
- What followed after the auction was entirely predictable, and indeed was predicted by Mr Cannon and Mr Emuss. The purchase was completed on 9th February 2000. Shortly thereafter, the Claimant turned his attention to N.C.P., and on 11th February 2000, Mr Cunningham, on behalf of the Claimants, sent a letter to N.C.P. enclosing a document that he described as a "notice of determination of your licence", and which was couched in the language of licence. After a short exchange of correspondence, N.C.P.'s solicitors wrote on 18th April 2000, disputing the "validity of the notice", and contending that N.C.P. "has a tenancy protected by the Landlord and Tenant Act 1954". This response was exactly in accordance with the information passed by Mr Ottley to Mr Emuss in mid-November. Thereafter, on 25th April 2000, Mr Cunningham sent a further letter, enclosing a notice to terminate a business tenancy, pursuant to section 25 of the 1954 Act. By the same date, N.C.P. had the comfort of the advice of leading Counsel, confirming its protected tenancy, and disputing the effect of the notice served on 11th February to determine N.C.P.'s right of occupation. On 2nd May, Mr Cunningham wrote to Mr Stephenson's firm, complaining of misrepresentation, and claiming rescission or damages in lieu. That letter met with a disingenuous response from Mr Stephenson himself dated 3rd May 2000. "Will you please explain to us precisely at what point any misrepresentation was made to your clients. Having reviewed the Special Conditions of Sale, and replies to the Pre-Contract Enquiries, we are at a loss to see where this took place. All the documentation under which N.C.P. occupied the property was disclosed prior to the auction, and it was up to your client to satisfy himself as to the legal implications of that documentation. Nothing whatever has been hidden from your client, nor has any incorrect statement been made". Unsurprisingly, Mr Stephenson did not find it necessary to deal with the express allegation raised by the Claimants, which related to the catalogue.
- In the light of that history, I turn to consider Misrepresentation Act, s.2(1), which reads as follows:–
Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true.
- I have already held that the vendors, by their agents, made a misrepresentation to the Claimant, who, in reliance upon it, was induced to enter the contract. I am also satisfied that the Claimant has suffered loss, although the extent of that loss falls to be determined at a later stage of this litigation. I reject the suggestion that no loss has been proved. On the material before me, at the least, some part (or indeed all) of the payment to N.C.P. in consideration of its departure from the car park represents loss to the Claimant caused by the Defendants' misrepresentation. I digress to refer to a conflict between the evidence of the Claimants' son and Mr Emuss, the substance of which is to be found at paragraphs 79-81 of Mr Emuss' statement and paragraphs 1-5 of Kamal Pankhania's statement. I found Mr Pankhania junior an unimpressive witness, but then, so was Mr Emuss. Some of the matters in dispute are immaterial, but I have reconsidered their evidence. I accept that there was a conversation between Mr Pankhania junior and Mr Emuss as to financial matters, but I do not accept the suggestion that Mr Emuss was told, in effect, that N.C.P. was needlessly paid off. Nor do I accept that a hint was given to Mr Emuss that there was something untoward in the manner in which planning consent had been obtained in respect of the warehouses, which is the suggestion implicit in paragraph 79 of Mr Emuss' statement. Both the solicitor, and the chartered surveyors, had actual, (or at the very least ostensible), authority to make representations to potential purchasers, through the medium of the auction catalogue, and generally throughout the progress of events before, at, and after the auction. The vendors are liable for the acts of their agents in misrepresenting matters to the Claimant, and the knowledge of each such agent is to be imputed to the vendors. See, for example, Strover -v- Harrington  2 WLR 572.
- In those circumstances, the vendors would have been liable to damages in respect of the misrepresentation had it been made fraudulently. Liability follows, even if the misrepresentation was not made fraudulently, unless the vendors prove the statutory defence. In my judgment, they fail on both limbs of the defence. None of the three principal agents who acted for the vendors in respect of the sale, namely Mr Cannon, Mr Emuss and Mr Stephenson believed that the representations were true. None of the three believed the arrangement with N.C.P. to constitute a licence, and each of them was virtually certain that it was a business tenancy, not a licence. Even had they entertained a belief that it was a licence, none of them had reasonable grounds to do so. The representation was made in a catalogue prepared without legal advice, without full investigation of the history of the matter, and without any sensible basis for suggesting that the arrangement did not take effect, as was obvious to any lawyer or commercial property specialist, as a protected tenancy. As events proceeded towards the auction, it became, if anything, even more obvious to them that this was a protected tenancy, when Mr Cannon and Mr Emuss learned that N.C.P., a nationwide specialist in respect of commercial car parks, intended on legal advice to assert that it was a protected tenancy.
- It follows that each of the elements of s.2(1) is made out, and that the vendors are liable in damages, even though the true authors of the misrepresentation are their agents, rather than the vendors themselves (particularly the Second Defendant) subject only to the effect of any contractual term that excludes or restricts liability for misrepresentation. As a preliminary, it is for the vendors to show that any term relied on, upon a proper construction, does in fact exclude or restrict such liability. Even if on a proper construction it does so, it is of no effect, except in so far as it satisfies the requirement of reasonableness as stated in Unfair Contract Terms Act 1977 s.11(1) - see Misrepresentation Act 1967, s.3, as substituted by s.8(1) of the 1977 Act. It is for the vendors to show that any term relied on satisfies the requirement of reasonableness.
- The relevant parts of s.11 read as follows:-
(1) In relation to a contract term, the requirement of reasonableness is that the term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contact was made.
(5) It is for those claiming that a contract term of notice satisfies the requirement of reasonableness to show that it does.
- The central provisions upon which the Defendants rely to exclude or limit their liability are these:-
(a) a passage in the auction notices in the catalogue, in these terms "On signing the Memorandum of Sale, purchasers will be deemed to have inspected the lot they have purchased, obtained any professional advice they require and have read the General and Special Conditions of Sale, the relevant legal documentation and any addenda prior to the sale. They will also be deemed to have heard and understood any Auctioneer's announcements made during the sale that relate to the lot they are purchasing"
(b) Paragraph 2.3 of the General Conditions of Sale, whereby "the purchaser shall be deemed to have full knowledge of the Standard Conditions and the Special Conditions..."
(c) Paragraph 12.5 of the General Conditions of Sale, whereby the purchaser "admits and confirms" that he
(i) has inspected the property
(ii) has obtained advice and information with regard thereto independently of the vendor and the auctioneers
(iii) has not acted in reliance on nor been induced to enter into the purchase of the Property by any representations, warranties or statements made by or on behalf off the Vendor or the Auctioneers other than such as may have been given or confirmed by the Vendor's Solicitors on behalf of the Vendor in any written reply to any enquiry made by or on behalf of the Purchaser before the auction'.
(d) Paragraph 13.5 "... the Purchaser shall be deemed to purchase with full knowledge of the state and condition of the property whether or not he makes any enquiry and neither the Vendor nor the Auctioneers shall be required or bound to inform the Purchasers of any matter whether known to them or not it being solely the duty of the Purchaser to satisfy himself at his own risk in respect of such matters."
- The starting point is Lowe -v- Lombank Ltd  WLR 196. An acknowledgement, or confirmation, by one party to a contract to another, whether actual or (more often) deemed, does not constitute a contractual obligation "which is essentially a promise by the promisor to the promisee that acts will be done in the future or that facts exist at the time of the promise or will exist in the future" - per Diplock J. at p.204. Rather, it is a representation, which "could only operate as an estoppel preventing the Plaintiff from asserting the contrary". In that case, as in this, no estoppel was made out, as the further elements, that the representation must be intended to be acted upon by the person to whom it was made, believed to be true by that person, and acted upon by him to his detriment, are not established, or even alleged. That analysis is fatal to the majority of the provisions set out in the preceding paragraph.
- I have already indicated that the misrepresentation as to the car park was a matter of considerable importance to the Claimant, and indeed to any purchaser, and that he would probably not have purchased had he known of it, and certainly not at the same price, nor would he have faced such competitive bidding. I have also held that the misrepresentation was made deliberately by the agents for the vendors, in the knowledge that it was inaccurate. In those circumstances, no term, cast in small print, which purported to protect the purchaser from liability for a misrepresentation as to a major matter, of considerable importance to the purchaser, when that misrepresentation had been made deliberately. Either of those factors would render a term which purported to exclude liability both unfair and unreasonable, viewed in the light of the circumstances known to the parties when the contract was made. It is not necessary to consider the law on this topic extensively, but I draw attention to Goff -v- Gauthier 62 P&CR 388, especially at p.401, Walker -v- Boyle  1 WLR 495, especially at 507A-508D and South Western General Property Co Ltd - v- Marton 263 E.G. 1090 esp. at 1092 "These terms, if they were included, would exclude liability for a failure to tell the purchaser more than only a part of the facts which were among the most material to the whole contract of sale".
- As an alternative to its claim under Misrepresentation Act 1967, s.2(1) the purchasers seek to recover damages in lieu of rescission pursuant to s.2(2). The measure of damages under that sub-section differs from, and is generally less advantageous than, that obtaining under the previous sub-section. In the light of my determination of the claim under s.2(1), any decision as to s.2(2) becomes academic. However, in my judgment the claim under s.2(2) fails. It is common ground that the purchasers have lost the right to rescind, whether by affirmation, passage of time or otherwise. There is a judicial divergence of opinion as to whether, when the right to rescind has been lost, damages in lieu are available under s.2(2). Each of these authorities has been decided at first instance, and, rather than enter a potentially endless chain of judicial reconsideration of the same point at first instance, it is incumbent upon me to follow the most recent decision. However, the point is not without interest, and I have considered the relevant authorities. Even if not constrained by authority I would have numbered myself among those who have held that there is no power to award damages under s.2(2) where rescission is no longer available, and thus found common cause with those who determined Government of Zanzibar -v- British Aerospace (Lancaster House Ltd  1 WLR 2333, Floods of Queensferry Ltd - v- Shand Construction Ltd  Building LR 81, and (in the context of damages in lieu of injunction) Millett L.J. in Jaggard -v- Sawyer  1 WLR 269 at 284A-285C and 290A. To contrary effect is Thomas Witter Ltd -v- TBP Industries Ltd  2 All ER 573. I have nothing to add to the learning on this point, save to make the observation that the introduction of s.2(2) was to mitigate the effect on the vendor of rescission, which would otherwise be available to the purchaser, and in certain circumstances was an over-harsh remedy, rather than to provide a remedy where there was none.
- The second alleged misrepresentation relates to the likelihood of a grant of planning consent for residential or live/work development on the car park. Its merits are in complete contrast with those of the first misrepresentation, and in my judgment the Claimants' case fails comprehensively, for a range of reasons.
- Hackney was both owner/vendor of the car park, and the planning authority. An insight into the prospects of obtaining planning permission was a matter of considerable interest to any potential purchaser, including the Claimant. To assist potential purchasers, to facilitate the sale, and to avoid a multiplicity of troublesome enquiries from individual potential purchasers to the Hackney planning officers, Mr David Morrisey undertook the preparation of a document, entitled "Planning Guidelines" which was provided to potential purchasers, and gave information as to planning matters. Mr Morrisey is a well qualified and very experienced planning officer. He holds a degree, and a post graduate diploma in urban planning, and after qualification in September 1987, he took up post as a planning officer in the London Borough of Hillingdon, moving to a similar post at Hackney in 1989. He was promoted to principal planning officer, and, to borrow his account "dealt with project implementation, and was part of a team dealing with corporate initiative, environmental projects and capital programme management". He was engaged in this work for about six years, and in late 2000 became a member of a team established to identify sites for Hackney (which had considerable need of the proceeds of such sales) to sell. His role was to give planning guidance, and he worked closely with Nelson Bakewell, until moving back to Hillingdon in June 2001, where he holds a significant planning appointment.
- In my view, Mr Morrisey had, when he drew up the Planning Guidelines, as comprehensive and expert a knowledge of the redevelopment of substantial properties in Hackney as is to be found. That knowledge was not merely academic, or confined to an expert understanding of such documents as the Unitary Development Plan, but was grounded in years of intensive practical involvement, with considerable "state of the art" knowledge, gleaned from his daily dealings with other planners, vendors and developers, and from his knowledge of the progress of planning applications and development of other sites in the area. Further, my assessment is that he was a straightforward, reliable and accurate witness, with no motive for departure from the truth.
- Mr Morrisey's evidence, if accepted, is fatal to the Claimants' case on the second limb of this litigation. I have no hesitation in accepting his evidence as truthful and accurate. Mr Morrisey says, and I accept, that he carried out a site visit with Mr Emuss, and at his request drafted the Planning Guidelines, a procedure with which he was familiar from other cases. It was not suggested to him that Mr Emuss or Mr Cannon (or indeed anyone else) sought to influence the content of the Planning Guidelines in any way, and I am satisfied that no such thing was done, and that the Planning Guidelines represent the product of Mr Morrisey's own enquiries, specialist knowledge and personal drafting. He accepts that Hackney had a strong need to sell a number of properties, and at as good a price as possible, but in my judgment, he did not allow that factor to lead him into deliberate or reckless inaccuracy or exaggeration.
- The Planning Guidelines are at TB77. They include the following passages:-
(a) Potential for a 3-4 storey mixed use building comprising office/studios with residential/live-work on upper floors (this passage in bold type)
(b) As the site lies in a defined employment area in the U.D.P. there is a presumption in favour of employment related development. It is considered that a 3-4 storey building would benefit the townscape and contribute towards rebuilding the character of the area. A building less than 3 storeys in height would not achieve the desired architectural impact. In this case mixed development comprising office/studios (Class B1) on the lower and upper ground floor (i.e. over 2 floors) and residential and/or work-live units on upper floors would be acceptable subject to satisfactory design.
Other passages dealt with design details, such as height of the new building, the amount of office/ commercial floor space achievable (c. 800 sq. m. [9,000 sq ft], and detailed suggestions as to design principles to accord with the conservation area in which it would stand.
- The document was prefaced by this introductory note:–
"Please note that these comments are purely informal guidelines and are not an adopted brief. They are provided without prejudice to the determination of a planning application.
Developers should make themselves familiar with the council's Unitary Development Plan and the policies contained within it particularly in respect of environmental standards, parking and service requirements and conservation area policy. There is a separate supplementary guidance note on live-work units".
- The Unitary Development Plan was adopted on 511, June 1995. The car park lies within a defined employment area identified by Hackney. The key strategic policies as to employment, so far as relate to the present case, are S.25 and E2. S.25 reads "The council will resist the loss of employment land and premises through changes of use and redevelopment especially within defined employment areas". However, there is no evidence that any employment was based on the car park, even a car park attendant, and such impact as the operation of the car park had on employment can only have been by provision of administrative tasks in arranging for contract parking, enforcing its terms, and arranging for the site to be kept in reasonable order, none of which have any major planning significance. E2 reads "The council will give favourable consideration to employment-generating development within the defined employment areas (subject to 2 immaterial provisos). Residential development will not normally be permitted within defined employment areas". The side note, headed "Justification" to E2 reads in part "Some sites and premises in DEA are not used for employment purposes. If they become vacant the council will seek their development for employment generating uses ... The council considers that opportunities for residential development exist elsewhere and that the introduction of residential uses into employment areas would undermine employment objectives and would offer a poor standard of residential amenity". The background to these policies was the continuing decline in employment in the area, and a desire to reverse that trend, and provide employment opportunity for the very high numbers of unemployed persons living in the area.
- A supplementary planning guidance note entitled "Live/Work Development" was approved in June 1996. Live/Work units are those in which the occupant can both live and work on the premises, for example an artist with a studio at the front, and living quarters at the back of his flat. In the June 1996 note, Hackney recognised the increasing demand for this type of accommodation, and stated "Live/work proposals can provide for the mixed use of what are historically solely employment areas without compromising the employment status of those areas". A report had been prepared by the planning sub-committee in July 1994, identifying particular opportunities for residential and live/work units in South Shoreditch D.E.A. Guidance was given as to the Hackney's requirements when assessing live/work developments.
- On 20th July 1999, a document entitled "Policy Guidance for Live/Work Uses" was adopted. Paragraphs 3.4 - 3.5 are of interest. In three and a half years from March 1995 to September 1998 permission had been granted for 900 live/work units in Hackney, with a concentration in South Shoreditch. A further scheme in Stoke Newington for 120 such units was under consideration. Paragraph 3.5 acknowledged that since adoption of the Unitary Development Plan and the Supplementary Guidance Note, there had been changes in the government's guidance and advice, and in employment and property trends. The latter document was acknowledged to have a relevant shortcoming, namely the absence of guidance on the provision of new build live/work developments. Paragraph 6.1A set out general policies, by way of Interim Policy Guidance for live/work development in premises and sites in D.E.A.s. Those policies provided that live/work development will only be allowed in D.E.A.s where certain criteria were met, the second of which read "In premises where there is a proven history of vacancy (at least 6 months) due to its unsuitability for continued use for Class B1-B8 purposes. The tenth was that such development proposed on vacant sites will only be considered if it is proven that a Class B1-B8 scheme is not viable on this site". An Appendix contained explanatory notes, which included information to be provided by applicants as to the history of advertisement of the premises (i.e. to establish lack of demand for Class B use).
- Such a shift in emphasis from 1995-6 to 1999, and the considerable number of live/work units permitted during that time, is only explicable upon the basis that there was lack of demand for purely employment based uses, and that Hackney had been constrained to modify considerably its stance upon the matter. Mr Morrisey must have had considerable knowledge of, and involvement in the events that led to that change of position by Hackney, and it was predictable that any further modification of its position by Hackney after June 1999 would be by further relaxation of the requirement that development should be employment based.
- The planning guidelines do not constitute a contractual promise by Hackney to grant planning consent for residential or live/work development. No such obligation could properly be entered by a planning authority, which has an obligation to consider planning applications objectively on their merits in accordance with the law, and cannot fetter its discretion to do so, whether or not it owns the site in question, or has a financial interest in advantageous development.
- The planning guidelines contain a mixture of (i) forecast as to future events (or representation as to future fact), (ii) statements of the opinion of Mr Morrisey and (iii) representation as to existing facts. Establishing which aspects of the guidelines fall within each category is not altogether easy, and depends to a degree upon inference and implication. Nevertheless, it must be borne in mind that no action lies in respect of representations as to the future facts [i.e. category (i)] - see Ex. Burrell (1876) 1 CHD 537 and similar authorities - nor as to statements of opinion [i.e. category (ii)] - unless made by someone with special knowledge or skill, see Esso Petroleum Ltd -v- Mardon  QB 801. An action for misrepresentation only lies if (a) Mr Morrisey has represented that he holds a particular opinion, when in fact he does not do so, or (b) there is a representation as to the views presently held by the planning authority as to what development is acceptable to them, in respect of the car park site or the area generally, but the planning authority does not presently hold such views.
- I am satisfied that, so far as the document consists of an expression of Mr Morrisey's opinion at the time it was drafted, or at any material time thereafter up to the date of completion of the sale, Mr Morrisey genuinely held such an opinion. Further, I am satisfied that, so far as the document consists of representations as to the views of the planning authority at the time it was drafted, or at any material time thereafter up to the date of completion of the sale, the local authority did in fact hold such views. Even if this analysis were rather too narrow, the opinions expressed by Mr Morrisey are accurate, and are likely to be proved so by future events.
- To deal with the central features of Mr Morrisey's document individually:-
(a) "The car park had, and has, potential for a 3-4 storey mixed use building comprising office/studios with residential live/work on upper floors". That is a representation as to existing fact, but one that is accurate. I am also satisfied that the planning authority held, and hold the view that there was such potential, that Mr Morrisey was, and is of that opinion, and that in due course the car park will be developed for such use.
(b) "Mixed development comprising office/studios (Class B1) on the lower and upper ground floor and residential and/or work/live units on upper floors would be acceptable subject to satisfactory design". Implicit in that statement, is a representation that this was the present view of the local authority when the document was prepared, and that Mr Morrisey genuinely held that opinion. I am satisfied that the local authority did hold that view at that time, and at all material times thereafter, and continues to hold it. The same applies to Mr Morrisey's opinion. Further, it is probable that in the near future such development will be accepted.
(c) The statement that "There is a presumption in favour of employment related development" is a representation as to the contents, and arguably legal effect of the Unitary Development Plan and two subsequent notes, and is an acceptable brief summary of their effect.
- I am satisfied that the contents of the Planning Guidelines prepared by Mr Morrisey are accurate, and misrepresent nothing. I anticipate that, in the fairly near future, upon presentation by the Claimant of an appropriate application for planning consent, it will be granted in terms that accord with the passages in the Planning Guidelines that I have set out and considered in the last few paragraphs.
- If the Planning Guidelines contained misrepresentations (as in my view they do not) the vendors would succeed in establishing the statutory defence under Misrepresentation Act 1967 s.2(1). Mr Morrisey did believe, up to the time the contract of sale was made at the auction, that the matters represented in the planning guidelines were true. So did all others concerned on behalf of the vendors in the sale, as they based themselves upon the Planning Guidelines he had prepared, and had no reason to doubt them. The second limb of the statutory defence is also made out, as Mr Morrisey had reasonable ground for that belief. It was based upon extensive knowledge of development in the area, of the shift in position of the planning authority from 1995 onwards, and extensive general knowledge of planning practice.
- It was submitted on behalf of the Defendants that no documents relating to planning applications and development of other specific sites in the area had been made available for their perusal, and that this put them at a disadvantage, by being unable to draw attention to features that differ between those sites and the one presently under consideration. I disagree. Mr Morrisey's assessment does not derive from drawing a close parallel with any other particular site, but from his extensive knowledge of the broad trend of development in the area. Disclosure of documents on the scale implicit in the Defendants' argument on this point would be disproportionate.
- A synopsis of Mr Morrisey's guidelines found its way into the auction catalogue at page 42, the page devoted to Lot 46 (the car park). The general description of the car park was "freehold development site". Under the title "Planning", was a paragraph which reads "The property is located in the Conservation Area. We understand that the local planning authority would not object to a comprehensive redevelopment of this site. A residential scheme over basement, ground and three upper floors would be considered with some (B1) office or employment generating use on the lower two floors". The first sentence, as to the conservation area, is accurate. So is the second as the planning authority has no objection to a comprehensive redevelopment of the site, nor is likely ever to have any such objection. The third sentence must be read in the light of the expanded account given in the Planning Guidelines, and thus read, there is no inconsistency between them. The words "a residential scheme" in the catalogue must be taken to mean a scheme for residential or live/work units, and the third sentence in that passage in the catalogue, so far as it stated the present view of the planning authority, or the opinion of Mr Morrisey (or indeed any other relevant person) was accurate. Again, even if that were not, so the statutory defence under s.2(1) would succeed in respect of the catalogue just as in respect of the Planning Guidelines.
- Planning consent in respect of the warehouses was fairly readily granted, in terms which accorded with Mr Morrisey's views, and which represented a considerable relaxation of the employment based policy, as the basement and ground floor of the warehouses were to be for Class B1 use, but the five upper floors for 20 live/work units and 14 flats. In the light of that grant, which was by Ms Ryan, the only realistic live question in respect of development of the car park was the balance to be struck between employment based use and residential or live/work use. On 22nd September 2000, six months after completing his purchase, the Claimant, through his agents, Draper Neal Associates, submitted an application for planning consent in respect of the car park. The brief description of the proposed development on the application form was "The construction of a new building, comprising a ground floor B1 accommodation, and three No. upper floors of 12 No. total residential units. A semi-basement car park is included".
- Mr Morrisey said, and I accept, that he had circulated his Planning Guidelines to other planning officers at Hackney, but had received no adverse comment. It must have been circulated to Angela Ryan, the senior planning officer who was allocated, after receipt of the September 2000 application, to consider it. Mr Morrisey himself had no part in the consideration of the application, or recommending its acceptance or rejection. Her account of the matter, set out at paragraphs 11-15 of her witness statement, casts considerable doubt on the assertion by the Claimant that he acted in reliance on the Planning Guidelines, or statements as to planning in the catalogue. Her statement relates to his actions after completion of the sale, whereas the Claimant has to show that he relied on those matters in making his purchase, but his later behaviour sheds light on his state of mind before purchase. He had been granted planning consent in respect of the warehouses, but then changed his mind, sought to modify the plan after the grant of permission, and appealed unsuccessfully against the rejection of the modified plan. The Claimant, and Draper Neal, persistently pressed Ms Ryan to grant permission for the modified plan in respect of the warehouses, implying that if she did so, he would apply for purely commercial development on the car park site. This suggests that the Claimant, with the assistance of Draper Neal, had formed an independent judgment as to what planning consent might be granted, without great regard to the detailed terms of the Planning Guidelines, although I do not regard these particular incidents as being of critical importance. However, the substance of the planning applications made by the Claimant strongly suggest that he was not at that stage relying on, or confining himself to, the Planning Guidelines, and his conduct casts great doubt on his assertion that he relied on them to any significant degree.
- The sequence of events was this. On 22nd September 2000, the Claimant submitted the first planning application in respect of the car park. That application was refused, and the refusal was notified on 14th December 2000. Later the same month, on 21st December 2000, the Claimant lodged an appeal against the refusal, but a day later submitted a second planning application in very similar terms to the first, save that the proposed use of the lower ground floor was different. Ms Ryan wrote to Draper Neal on 13th March 2001 (TB201), and 4th June 2001 (TB208). The appeal in respect of the refusal of the first application was opposed by Hackney, and refused (TB204-5). One of the three grounds upon which the appeal was dismissed related to loss of employment use, but the second and third related to the design of the building. The design submitted with the September 2000 application did not accord with policies EQ1 and EQ12 of the Unitary Development Plan, and Ms Ryan, whose recommendation was that the application be refused, also regarded it as heavily weighted towards residential development, with resultant reduction in employment generating use, and thus contrary to policies E2, E5 and S25. So did the inspector.
- The Claimant responded to the suggestion in the letter dated 13th March 2001 that evidence that the site would not sustain commercial development be . provided, by obtaining letters from three valuers to that effect. At paragraph 24 of her statement, Ms Ryan suggests that these letters were not specific to this particular site, and did not represent any genuine attempt to test the market. I agree with those comments.
- The Claimant suggests, in effect, that the stance taken by Ms Ryan represented the true views of the planning authority before the sale, and that the contents of the Planning Guidelines were thus a misrepresentation. I disagree. The Claimant knew that the planning authority would consider any application he made objectively on its merits, in accordance with law, and that no promise had been given to him that the planning authority would fetter its discretion by reference to the Planning Guidelines prepared by Mr Morrisey in respect of the sale. The task of assessing his first application was delegated to Miss Ryan, a senior planning officer, who exercised her judgment as to its merits. She took a stricter view as to employment based use than might have been expected, given the general history of relaxation of policy in the Hackney area, but she was entitled to take that view, and Hackney was entitled to act upon it in refusing the first application and opposing an appeal. To some degree, she appears to have been out of line with general opinion within the planning department at Hackney, and the manner in which other applications had been dealt with (perhaps particularly by requiring marketing evidence that the site would not sustain commercial use), but the representations in the planning guidelines and catalogue are not retrospectively falsified by her actions. In any event the matter is academic. The Claimant had not complied with the design requirements in major respects, and his first application was doomed to failure on the two design grounds in any event. Even had Ms Ryan taken a more relaxed view as to employment based use, his application would not have succeeded, nor would his appeal. Further, even as to proposed use, the first application did not accord with the relevant passages of the Planning Guidelines. The Claimant had sought to maximise residential use, at the expense of employment based use, by devoting the lower ground floor, or semi-basement, entirely to a car park, whereas the Planning Guidelines envisaged Class B1 use throughout that floor. The Class B1 use envisaged by Mr Morrisey on the lower and upper ground floors, was thus reduced by half. No tenable explanation as to how this is consistent with reliance by the Claimant on the Planning Guidelines has been advanced. In the first application, the upper three floors were to be for residential units, whereas Mr Morrisey had referred to "residential and/or work/live units". Thus the proposal for the upper floors while in accordance with one of the possibilities canvassed by Mr Morrisey, contained no concession to employment based use at all. The reservation of the lower ground floor for a car park was no doubt to avoid the necessity to provide outdoor parking on the site, and thus reduce the developable area. Residential parking permits were not likely to be available in the street, as Mr Morrisey had indicated in the last paragraph of his Planning Guidelines. The second planning application contained an amendment as to the lower ground floor, which was to be shared by a car park and Class B1 accommodation. This still did not accord with Mr Morrisey's Planning Guidelines, which were based on Class B use of the entire lower ground floor. The other amendment was that the three upper floors were to be live/work units, rather than purely residential.
- In my judgment, the second limb of the claim fails comprehensively. The relevant representations in the Planning Guidelines and the catalogue, whether express or implied, were accurate, and in any event were believed to be true by the relevant people, who had reasonable grounds for such belief. The claimant did not rely upon close scrutiny of those parts of those documents in deciding whether to purchase, on what terms, and at what price, but used his independent judgment, based upon his knowledge of the area, and local planning practice (some of it no doubt gleaned from his earlier purchase of another site) and in reliance on his own judgment, supplemented by advice from experienced specialist advisers, Mr Cunningham and Draper Neal. After purchase, he did not base his planning applications upon the Planning Guidelines, but submitted in September 2000 the first application, which did not accord with the Planning Guidelines in important matters of design, or as to the use of the basement, which was an integral part of the relevant passage in the planning guidelines. The defects continued, albeit with some amelioration, in the second application. The Claimant has plainly suffered no loss to date, as his inability to develop the site arises from his failure to comply with the design requirements, which would have occurred even had there been a misrepresentation, upon which he had relied, as to category of use.
- I have given thought, in the light of the conclusions as to the second limb of the claim, as to whether my assessment of the Claimant's behaviour in that regard casts doubt upon whether he did in fact purchase in reliance on the car park representations. However, I am satisfied that he did so, for the reasons I have set out earlier in this judgement, and my view is not altered by the history of the planning aspects of the case.
- The consequence is that the Claimant has established that the Defendants are liable to him in damages in respect of the first limb of his claim, namely the car park representations, and damages must be assessed. I invite the parties to consider what directions may be appropriate to progress the remainder of the case. However, the Claimant has failed on the second limb of his claim, namely the planning representations, and that limb must be dismissed.
REX TEDD Q.C.
31st July 2002
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