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Landlords and agents beware: a reminder of the costly implications of a throw-away (mis)representation

Two dairy farmers, the Wakleys, that took on the Crown Estate were rewarded for their resolve on 15 December 2016 when the High Court in Bristol handed down Judgment in their favour.

Proceedings had initially been commenced against them by the Crown Estate Commissioners for possession of a farm known as Staple Park Farm (“the Farm”).

The Wakleys succeeded in their claims of breach of tenancy and misrepresentation on the part of their landlord, the Crown Estate Commissioners, to the tune of £1.75m in damages. The losses included significant loss of profits.

The powers of Crown Estate Commissioners over Crown land

Following the Crown Estate Act 1961, management of land owned by the Crown (excluding the private estates of Her Majesty) was divested in the Crown Estate Commissioners. The Commissioners have an almost unlimited discretion to deal with Crown land as they see fit, although they are officially accountable to Parliament. In consequence, the negotiation and grant of new leases fall to them and those that represent them.

In this case, a Crown Estate representative had shown Mr Wakley around the Farm in June 2007.  The Wakleys moved into the Farm, along with their children and herd of dairy cows later that year and a Crown Estate farm tenancy was formalised the following year.

The case for misrepresentation of the property

In the proceedings, the Wakleys asserted that in submitting their tender for the Farm, they had relied upon assurances given by the Crown Estate representative that:

  • The milking parlour was ‘right up to date’;
  • The slurry/dirty water storage and disposal system was ‘right up to date’;
  • The Farm had a plentiful and reliable freshwater supply and effective distribution system; and
  • The silage (for use as animal feed) to be purchased as part of the incoming valuation was ‘very good’.

These representations turned out to be untrue and seemingly caused the Wakleys great difficulty in making a success of the Farm. By way of example, the silage was contaminated with wire causing illness amongst their herd and an increased mortality rate. The Wakleys ultimately could not pay their rent and the Crown Estate Commissioners sought possession.

In defence to the possession proceedings, the Wakleys advanced a case that the representations given by the Crown Estate representative had been false and that they had induced them to take on the Farm. It was an allegation of negligent misrepresentation rather than fraud.

The findings of the Court

Notably, the Crown Estate representative was found to have simply passed on information to the Wakleys that he had been told by others. He had not expressed his own view or given advice on the condition or productivity of the Farm.

Regardless, the Judge found that there were no reasonable grounds for the representative to believe that those representations passed on about the Farm were true, as reasonable enquiries as to their truth had not been made. The condition and productivity of the Farm had been misrepresented to the Wakleys causing them significant losses.

Avoiding misrepresentation claims when letting or selling land

This case is an apt reminder to all those in the business of negotiating the letting or sale of land: optimistic, yet careless, statements as to the condition of a property can be expensive, and of course embarrassing (as this case is for the Crown).

The Judge’s comments suggest that an approach of caveated responses to queries about the property, shifting the burden to investigate further back onto the potential tenant, may well protect from such costly claims.

Whilst there is a defence available to a claim of misrepresentation where the agent or landlord can show they had reasonable grounds for considering their representation was true (and this belief was sustained until the contract had been concluded), in practice this is difficult to prove, particularly when the viewing or negotiation happened some years before.

In respect of agents, the individual that made (or is alleged to have made) the representation may no longer be in the employ of the agent, or their recollection hazy at best. Accurate and honest written particulars of a property are a crucial starting point. However, as this case highlights, agents would also be wise to keep notes of viewings and ensure those conducting viewings take reasonable care not to overstep their knowledge of the property.

Landlords must also be vigilant as to the scope of authority given to their agents, and ensure they protect themselves with robust indemnity clauses within formal agency contracts.

If you would like advice on misrepresentation claims or agency disputes, please email Hannah Laithwaite on hannahlaithwaite@lambchambers.co.uk

Hannah Laithwaite / 5th Jan 2017


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