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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> MacGregor & Anor v. City of Edinburgh Council [2004] ScotCS 18 (20 January 2004)
URL: http://www.bailii.org/scot/cases/ScotCS/2004/18.html
Cite as: [2004] ScotCS 18

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MacGregor & Anor v. City of Edinburgh Council [2004] ScotCS 18 (20 January 2004)

OUTER HOUSE, COURT OF SESSION

 

 

 

 

 

 

 

 

 

 

OPINION OF T G COUTTS, QC

Sitting as a Temporary Judge

in the cause

HELEN MacGREGOR and ANOTHER

Pursuers;

against

THE CITY OF EDINBURGH COUNCIL

Defenders:

________________

 

 

Pursuers: Sandison; Semple Fraser

Defenders: Brailsford, Campbell; Balfour & Manson

20 January 2004

INTRODUCTORY

[1]     The pursuers sue in respect of economic loss they allege they have sustained as a result of an erroneous certificate given by an employee of the defenders' statutory predecessors in response to an enquiry made to the Council by a third party.

[2]    
The case first appeared on procedure roll in October 2002 when discussion took place on the law relating to pure economic loss and what counsel for the pursuers described as the Hedley Byrne principle. The defenders attacked the relevance of the pursuers' averments and as a result, amendment took place and a continued diet of procedure roll on the amended pleadings was heard on 17 December 2003.

THE FACTS

[3]    
In 1989 the pursuers, were interested in the purchase of and did purchase heritable subjects at 22-26 Lady Lawson Street, Edinburgh. They purchased them with a view to the operation therefrom of a hot food takeaway business. Agents for the vendors obtained from the City of Edinburgh District Council a certificate dated 28 November 1989 stating that the authorised use of the subjects was for a hot food carry-out shop. That statement was erroneous. The pursuers aver that they purchased the subjects having seen the said certificate and in reliance upon the truth and accuracy of the statement as to authorised use contained therein.

[4]    
The first-named pursuer operated the premises as a hot food carry-out shop for about nine years. In the early part of 1998 the pursuers advertised the subjects for sale. They asserted, having made no further enquiry and in accordance with the terms of the certificate of 1989, that the premises had the benefit of planning consent for use as a hot food carry-out shop. The prospective purchaser, Howies Restaurant, had the property valued and the pursuer avers that they were interested in acquiring the subjects at the evaluation. However, they did not note interest nor submit an offer. Having approached the defenders for confirmation of the existence of planning consent for use of the subjects as a hot food carry-out shop they were informed that the existing planning consent did not permit such use. The pursuers thereafter set about obtaining a certificate of established use, which they by effluxion of time would have had available in any event, after a further year or so. They incurred expense in that regard. They claim sums which they say were the expenses incurred but also claim the sum of £40,000 which was the difference between what they expected to receive from Messrs Howies and what they did in fact receive in the end of the day.

[5]    
The pursuers aver that it was common practice for law agents to obtain such certificates and to refer to them in missives for the sale of property as being the basis upon which the prospective purchaser was deemed to have satisfied himself as to the planning permission in relation to the property. They aver that the defenders, and in particular the defenders' official who issued the certificate, knew or "ought to have been fully aware of the nature of the transaction in contemplation of which the certificate was being sought." They continue that the official would be aware that the information would be communicated to prospective purchasers of the property to which it related and that it was very likely that such purchasers would rely on the information in deciding whether or not to buy the property.

[6]    
The effect of the particular type of enquiry made is what is at issue between the parties on the merits. The defenders aver that it was not possible for the defenders' officer to be aware of the transaction involved when a request for a "file search" was submitted. A distinction is drawn in the pleadings between that type of enquiry and the system of requests for property enquiry certificates associated with conveyancing transactions.

[7]    
That is a major issue of fact which requires to be determined by way of proof.

THE APPLICABLE LAW

[8]    
In the debate, the Court was referred to Murphy v Brentwood District Council 1991 1 AC 398; Caparo Industries Plc v Dickman 1990 2 AC 605; Hedley Byrne & Co Ltd v Heller & Partners Ltd 1964 EC 465; Henderson v Merrett Syndicates Ltd 1995 2 AC 145; Williams v Natural Life Ltd 1998 1 WLR 830 and Royal Bank of Scotland Plc v Bannerman 2003 SLT 181.

[9]     From these cases I consider, that the law which applies to the factual situation narrated above, presupposing that a negligent mis-statement was made, is that the pursuers have to establish, since the statement was not made to them, that they were persons for whom the defenders had undertaken an "assumption of responsibility" for the accuracy of the certificate. A defender it has been said requires to be fully aware of the nature of the transaction which a pursuer has in contemplation, must know that the advice or information will be communicated to that pursuer directly or indirectly and must know that it is very likely that the pursuer will rely on that advice or information in deciding whether or not to engage in the transaction in contemplation - Caparo 620-621. However, the maker of the statement is not under a duty of care to all and sundry for any purpose for which they may choose to rely on it. As between the pursuers and defender in the present case, the defender requires to know that the statement would be communicated to the pursuers specifically in connection with a particular transaction or transactions of a particular kind and that the pursuer would be very likely to rely on it for the purpose of deciding whether or not to enter upon that transaction or upon any transaction of that kind - Caparo 621E-F. It was stated in Henderson v Merrett Syndicates p. 181, that once a case is identified as falling within the Hedley Byrne principle, there should be no need to embark upon any further enquiry whether it is "fair, just and reasonable" to impose liability for economic loss and that there is no reason why the defender should not be liable in damages for economic loss which flows from the negligent performance of services, or misstatement. That loss must flow naturally.

MATTERS TO BE DETERMINED

[10]    
1. Was there an assumption of responsibility? So far as that question is concerned, the matter will require to go to proof since there are major issues between the parties as to the circumstances in which the certificate was sought and given.

2. Relevance of averments of loss. If the pursuers establish that they would not have entered into the purchase of the premises but for the certificate, which they do not expressly aver but which I think may reasonably be inferred from their averments, then the result was that they were misled into purchasing a property which did not have attached to it a planning permission which they considered was necessary. In the event, they owned and operated premises which did not possess the desired element of planning permission for a hot food carry-out.

[11]    
The pursuers aver that they took steps and incurred costs in order to bring the property's planning consent into the state that they thought it was in when they purchased it. I think they are entitled to enquiry on that matter.

[12]    
More problematic, however, is the claim that in some way the erroneous certificate reduced the price they obtained for the property by £40,000. I do not consider that that is a loss which flows from the erroneous certificate, at least as pled in the present action. The pursuers thought they possessed a property with a particular attribute. That was wrong. The fact that they thought it possessed that attribute did not viewed objectively make the actual value greater. No doubt it would have been worth more if it had in fact had the said permission, but, for example, it could hardly be contended by Messrs Howies, had they purchased they property on the faith of the 1980 erroneous certificate that they had an action against the defenders.

[13]    
The certificate was given to the person selling the property to the pursuers, not to the pursuers themselves. Although the pursuers might rely on it, in my view they could only rely on it, subject to the matter being established at proof, to the extent of their own particular transaction. The certificate cannot have permanent validity and the measure of damages is not, in my view, what the pursuers might have got had the position they thought existed been the position in fact. The measure of their damages is either the loss of value attributable to the absence of planning consent or the cost of rectifying that error. Loss of a prospective sale in 1998 which had not even proceeded to a note of interest does not necessarily flow directly from the mistake made by the official in 1988 and is a speculative matter. The overall situation about planning might well have altered by 1998 whatever was said in 1988, and would, in relation to established use have altered by 1999.

DECISION

[14]    
Although I was moved to dismiss the action by counsel for the defenders because of fundamental lack of relevance in the principal claim, I am not convinced that that would be a just result. On the inference taken from the pursuers' pleadings that but for this certificate they would not have purchased the property in the first place, or not have paid so much for it ( they only aver that they relied upon it), they are, on their pleadings, entitled to attempt to establish the necessary cost of putting right the position they found themselves in but no more.

[15]    
Accordingly I shall refuse to remit to probation the averments relating to an alleged loss of £40,000 which occur on page 17, beginning "The best price" and ending with the words "first concluded for". The consequence is that the first conclusion will be restricted to the sum of £5,803.01 and quoad ultra I shall allow a proof before answer upon the remaining averments.


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URL: http://www.bailii.org/scot/cases/ScotCS/2004/18.html