Neutral Citation
Number: [2002] EWCA Civ. 1130
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM SWINDON COUNTY COURT
(His Honour Judge Bursell QC)
Royal
Courts of Justice
Strand,
London, WC2A 2LL
Wednesday, 31st July 2002
Before :
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Between:
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Mr Oliver
Ticciati (instructed by Wilmot & Co) for the Appellant
Ms Sara J Hargreaves (instructed by Charles Russell, Solicitors) for the Respondent
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1. This is an appeal from the order of His Honour Judge Bursell QC dated 20 November 2001. The action arose out of the purchase by the appellant from the respondent of a property known as The Eastington Hall Estate, near Upton-on-Severn, Worcestershire, pursuant to a contract dated 29 May 1997. The material issue for the purposes of this appeal is whether that sale included a large quantity of old flagstones which until early May 1997 were in a part of the property known as the dog garden. The facts are not in issue and may be briefly summarised.
2. The appellant inspected the property for the first time as a potential purchaser on 22 February 1997. He also visited the property on a number of other occasions before exchange of contracts. The property included a number of separate gardens. On a couple of these visits he saw the dog garden, a substantial part of which was covered in the old flagstones in question. It was also laid out with trees and shrubs and was partially surrounded by a stone wall. There is no finding that the appellant was shown the dog garden by the respondent or the respondent’s agent. Nor is there any finding that the respondent made any representation to the appellant about the dog garden or the flagstones apart from the answer to the enquiry before contract referred to below, or that there was any other communication between them about the dog garden.
3. There were sales particulars for the property in the form of a glossy brochure with photographs. There was no photograph or description of the dog garden as such but the property was said to include “landscaped gardens”. On the last page of the sales particulars, the following appeared:
Important Notice
1. These particulars ... must not be relied on as representations of fact. Purchasers must satisfy themselves by inspection or otherwise regarding the items mentioned below ...
3. ... No assumptions should be made with regard to parts of the property that have not been photographed.
6. The information in these particulars is given without responsibility on the part of the agents or their clients. These particulars do not form any part of an offer or a contract and neither the agents nor their employees have any authority to make or give any representations or warranty whatever in relation to this property.
FIXTURES AND FITTINGS
Those items mentioned in these sale particulars are included in the freehold sale. All other fixtures, fittings and furnishings are expressly excluded. Certain such items may be available by separate negotiation ...
4. Over the weekend of 3 to 5 May 1997, about 282 square yards of these flagstones were taken up on the instructions of the respondent’s husband and stacked in a field outside the curtilage of the property. On the husband’s instructions, grass was laid in their place. The judge found that the respondent’s husband wished to disguise the fact that the flagstones had been removed.
5. On 21 May 1997 a representative of the appellant’s solicitors visited the property. He saw and photographed the flagstones where they had been freshly stacked. On the following day, 22 May 1997, he raised the following enquiry before contract:-
With regard to the pile of paving slabs (between Eastington Hall and the pond immediately to the west) have these been taken from the curtilage of the Hall? If so, has listed building consent been obtained for this?
6. The response dated 23 May 1997 was “No and they are not included in the sale, but they are to be removed by the vendors”.
7. The judge held that this answer was made fraudulently in that the respondent’s husband knew that the flagstones had been removed from the dog garden and gave the answer with the respondent’s authority. The judge held that the respondent was not liable in contract to the appellant, but was liable for deceit. He held that the measure of damages was the cost of replacing, but not relaying, the flagstones on the basis that if there had been no deceit the respondent would have agreed to include the pile of flagstones in the sale. There is no appeal from the judge’s findings on deceit.
8. The judge found that the appellant originally agreed on 18 March 1997 to buy the property for £3.25m. However, due to the necessity of first selling his own house and the financial outlay that he felt was necessary to Eastington Hall, on 15 May 1997 he renegotiated the sale at £3.15m. Contracts were finally exchanged on 29 May 1997.
9. The basis on which the judge rejected the contract claim is not wholly clear. It was argued before him that the contract did not relate to flagstones which had been removed before the date of the contract because they were not fixtures at the date of the contract. The judge did not expressly decide this issue but appears to have rejected it. He further held that, if the contract on its true construction applied to fixtures at the time the appellant inspected the property then any claim was excluded by clause 8(1) of the contract. This provided:-
The buyer is deemed to have inspected the property whether or not the buyer has in fact done so.
10. The judge held that, to have any content, this deemed inspection must be deemed to have occurred immediately prior to the exchange of contracts. By implication, the judge decided that the appellant had no claim in contract because he had to be taken as knowing that the flagstones had been removed by the date of the contract.
11. The judge noted that the respondent admitted that she had acted in breach of clause 17 of the contract. This provided that she should provide the buyer with details of alterations carried out to the property during her period of ownership. However, the judge held that the appropriate remedy would be in damages, not restitution, and there is no appeal on this point.
12. The reality of the situation here is that the flagstones which were removed are still available to be returned to the property (although they have been moved to the Isle of Wight). I note that in one reported case concerning a fixture wrongly removed between contract and conveyance the court made an order for the fixture to be restored to the property: Phillips v. Lamdin [1949] 2 KB 33. There is a finding that the flagstones were of a special quality but we have not seen any evidence that these flagstones were unique or irreplaceable, and there is no finding on that point. In the amended particulars of claim, the appellant claims £75,687 as the cost of both replacing and relaying the flagstones. The real problem is that the appellant wants to recover the cost of relaying the flagstones. He does not seek to do this in tort but by pursuing his contract claim.
Appellant’s submissions
13. Mr Oliver Ticciati, for the appellant, submits that the judge should not have dismissed the contract claim. The contract on its true interpretation included the flagstones because, where an intending vendor shows a purchaser the intended subject-matter of the contract and then removes part of it without the knowledge of the intending purchaser, the subsequent contract should be construed so as to refer to the subject matter as it existed before the vendor altered it. Mr Ticciati submits that this proposition flows from the first principle for the construction of contractual documents laid down by Lord Hoffmann in Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 WLR 896, 912, (the I.C.S. case), that interpretation is “the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract”. The offer which the appellant made was for the property he had been shown.
14. Mr Ticciati further submits that the judge’s interpretation of clause 8(1) involves reading words into that clause which were not there. Contrary to the judge’s approach, the clause would be of value to the vendor in relation to matters which were unlikely to change between a deemed inspection carried out a reasonable time before exchange and the exchange, for example, in relation to boundaries.
15. Moreover, Mr Ticciati submits that the judge held by implication the appellant was deemed to have discovered any change made by the respondent since his first inspection whether or not that was reasonably discoverable and even though intentionally concealed by the respondent and that the judge was wrong in law so to hold. In support of this submission, Mr Ticciati relies on Gordon v. Selico Ltd [1986] 1 EGLR 71. In that case, the contract for the sale of the property in question included the clause that the purchaser should buy in full notice of the actual state and condition of the property. The Court of Appeal held that this did not prevent the vendors from being liable in deceit for dry rot which had been covered up. This was so, even though the purchaser had commissioned his own surveyor’s report which had mentioned the possibility of dry rot and even though the vendor had expressly refused to give any warranty as to the condition of the property. Mr Ticciati submits that a contracting party will not be allowed to rely on a contractual provision to relieve himself of the consequences of fraud.
16. Mr Ticciati further submits that the flagstones passed under clause 14 of the contract. This was headed “fixtures and fittings” and stated that the property sold by the contract included the items “specifically described” as being included in the sale in the sales particulars for the property.
17. Clause 14 goes on to deal with a schedule of fixtures which were either to be included or excluded in the sale. This was a motley list including such items as ceilings, fireplaces, shrubs, trees and certain garden stoneware, but it was not comprehensive and did not refer to the flagstones in the dog garden.
18. Mr Ticciati further submits that the judge could, as a matter of discretion, have ordered the return and relaying of the flagstones if he had found that a claim lay in contract. In this case, the respondent had made an open offer to return the items on 2 October 2000. There was no difficulty about their return and the flagstones were probably irreplaceable. Furthermore, the respondent’s conduct did not invite sympathy.
19. Alternatively, if the court considers that damages only should be awarded, the relief should include the cost of relaying the flagstones if the appellant succeeds in contract.
Respondent’s submissions
20. Ms Hargreaves, for the respondent, submits that the contract did not include fixtures which had been severed by the date of the contract. She submits that the principles of construction laid down by Lord Hoffmann in the I.C.S. case have limited if any application to a contract for the sale of land. Unlike many other contracts, such a contract can only be made in writing and the contract must incorporate all the terms which the parties have expressly agreed (see Law of Property (Miscellaneous Provisions) Act 1989, section 2(1)). The contract described the property being sold as property known as The Eastington Hall Estate, comprising Eastington Hall and certain “land”, all as included in specified title numbers registered at the Land Registry. Land would include “fixtures” at the date of the contract but not fixtures which had by then been severed from the realty. This was made clear by Standard Condition 3.2.1 of the National Conditions of Sale, 23 ed, which was incorporated into the contract (so far as not inconsistent). Standard Condition 3.2.1 states:-
3.2 Physical state
3.2.1 The buyer accepts the property in the physical state it is in at the date of the contract unless the seller is building or converting ...
21. So the buyer accepts the property, including the landscaped gardens, in the state they were in on the date of the contract.
22. Ms Hargreaves also relies on Standard Condition 5.2.1 of the same conditions similarly included in the contracts. This states:-
5. Pending completion
5.1 Responsibility for the property
5.1.1 The seller will transfer the property in the same physical state as it was at the date of the contract (except for fair wear and tear), which means that the seller retains the risk until completion.
5.1.2 If at any time before completion the physical state of the property makes it unusable for its purpose at the date of the contract:
(a) the buyer may rescind the contract ...
23. Ms Hargreaves informed the court that there is no authority on the meaning of “physical state” for the purpose of either of these conditions.
24. Moreover, submits Ms Hargreaves, had any representation been made to the buyer about the flagstones it could not affect the interpretation of the contract because clause 13 states:-
Entire Agreement and Representations
13. The Seller and the Buyer respectively acknowledge that this Agreement shall constitute and form the entire agreement between the Seller and the Buyer to the exclusion of any antecedent statement or representation whether oral written or implied or whether contained in any advertisement particulars or other matters issued or in any correspondence entered into by the Seller or its servants or agents and the Buyer hereby acknowledges that it has not entered into this Agreement in reliance upon any such statement or representation other than those which have been given by the Seller’s Solicitors in the written replies to preliminary enquiries and any written reply to an enquiry made by the Buyer’s Solicitors prior to the date of this Agreement upon which it is hereby agreed that the Buyer does rely.
25. In any event, the final words of clause 13 mean, submits Ms Hargreaves, that the buyer is fixed with the answer to the inquiry before contract that these particular flagstones were not included in the sale.
26. Ms Hargreaves submits that the terms set out in the sales particulars preclude any reliance on those particulars because they contain a notice that “purchasers must satisfy themselves by inspection or otherwise regarding the items mentioned below” (these included fixtures and fittings) and that “no assumptions should be made with regard to parts of the property that have not been photographed.” Ms Hargreaves accepts that the phase “landscaped gardens” in the sales particulars would include the dog garden.
27. Ms Hargreaves points out that it was not alleged that it was deceitful to move the flagstones and that the contract contained no warranty about the flagstones.
28. She also seeks to uphold the judge’s judgment on his interpretation of clause 8(1). In addition, the removal of the flagstones should have been self-evident and obvious. Gordon v. Selico does not assist because it relates to a claim in deceit and not a claim in contract. It does not assist the appellant to argue that the respondent had acted fraudulently since the fraud found by the judge was in respect of the way in which the additional enquiry was answered, not in relation to the abstraction of the flagstones.
29. Ms Hargreaves further submits that there can be no order for the return and relaying of the flagstones whether in contract or in tort.
Conclusions
30. As explained above, the contract described the property sold by the contract as “the property known as The Eastington Hall Estate” comprising Eastington Hall and certain “land” included in specified title numbers registered at the Land Registry. The only issue on this appeal is whether “the property” sold by the contract is the property as it stood at the date of the contract or the property as it stood at the date of the appellant’s inspection. The resolution of this issue depends upon the true interpretation of the contract. We are not concerned with any remedy which the appellant may have in tort or for misrepresentation. Indeed, the only pleaded representation in this action relating to the flagstones was the false answer to the enquiry before contract, which I have already set out. Judgment has already been given for the buyer on this matter. But the buyer is dissatisfied with that result for two reasons. First, the judgment only entitles him to damages (although it would appear that the seller would not strongly object to redelivering the flagstones instead). Second, the damages awarded are limited to the cost of the equivalent flagstones (without any compensation for the cost of relaying), because the judge found as a fact that, but for the deceit, the buyer would have negotiated to buy the property with the pile of flagstones and determined the measure of the damages recoverable accordingly. There is no appeal from the judge’s decision on the deceit claim. Although that decision, will in practice be otiose if the buyer succeeds in his appeal, I note that the buyer’s claim in contract is inconsistent with the measure of damages awarded on his deceit.
31. Can the contract be interpreted in the way the appellant contends? The starting point is that the terms of the contract must be interpreted against the relevant factual background known or available to both parties, and I do not accept Ms Hargreaves’ more extreme proposition that the principles laid down by Lord Hoffmann in the I.C.S. case have no application to a contract of this kind.
32. For present purposes, the relevant principles from Lord Hoffmann’s speech in the I.C.S. case are:-
(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract ...
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
33. However, the I.C.S. principles are principles only of interpretation. They do not entitle the court to disregard other provisions in the contract. Accordingly, the meaning of the expression “the property” used in the contract has to be ascertained from the contract read as a whole: see principle (1) above.
34. The flagstones were not “land” at the date of the contract and so Mr Ticciati has to submit (as explained above) that they were part of the property contracted to be sold because the buyer had in the course of his inspection of the property seen the dog garden with the flagstones before he made his initial offer to buy it. I would accept as a general proposition that the buyer made his offer to purchase on the basis of what he saw. But, since the subject-matter of the sale was realty, there was no binding agreement until the contract was signed.
35. The relevant factual background for I.C.S. purposes here is:
a) that The Eastington Hall Estate included “landscaped gardens”;
b) that those gardens included the dog garden;
c) that the dog garden was paved with old flagstones at the time of the buyer’s inspection and his initial offer;
d) that the area of the dog garden covered by flagstones was about the size of a tennis court;
e) that there was a pile of flagstones in a field which were not to be sold by the contract;
f) that the buyer, to the knowledge of the seller, believed as a result of the false answers to the enquiry before contract that those flagstones did not come from the property;
g) that the buyer, to the knowledge of the seller, believed that he was acquiring the dog garden with the flagstones and intended to acquire the dog garden so paved;
h) that the sales particulars made no representations about the dog garden.
36. None of these matters taken on their own or cumulatively is conclusive in favour of Mr Ticciati’s construction. As Ms Hargreaves points out, (a) and (b) do not suffice for the appellant’s interpretation argument because “the property” included the dog garden and even without the flagstones the dog garden was a landscaped garden. Neither does (c) assist because it does not follow from the fact that the seller permitted the buyer to inspect the property before he made his offer that the seller was offering to sell every fixture as at that date. The sales particulars made that clear. Although this may not be of any great importance, the initial offer was not the offer which led to the exchange of contracts. A further offer was made after the flagstones had been removed which led to the exchange of contracts.
37. As to (d) the area covered by the flagstones was significant, but it did not form an essential or even primary area of what was clearly a very substantial property in any event. As to (e), these flagstones were not fixtures at the date of the contract and the contract did not provide for the acquisition of the flagstones as chattels. Neither (f) nor (g) is a valid guide to the meaning of the term property as used in the contract as they constitute (as regards the buyer) expressions of subjective intent or belief, and the seller’s knowledge of their falsity was knowledge available to one party only. Items (e) and (f) may be relevant to the question of what representations were made to the buyer and the question whether the buyer relied on those representations. On no basis did the expression “property” include a pile of flagstones. Such representations did not, however, form a term of the contract because any pre-contractual representation which did not crystallise into a contractual term was excluded by clause 13 above. As to (h), the sales particulars expressly warned purchasers that no assumption should be made about any part of the property which had not been photographed, and the dog garden was such a part. Moreover, the flagstones were not items “mentioned” in the sales particulars and so they were not covered by the statement in the sales particulars as to the fixtures included in the sale. In summary, the background knowledge, which under principle (1) in the I.C.S. case the reasonable person (by whom meaning is to be tested) is to be taken to have does not assist Mr Ticciati’s argument.
38. Furthermore, Mr Ticciati’s interpretation is not justified by the express provisions of the contract. What the buyer agreed to buy was the property “known as” The Eastington Hall Estate. The expression “known as” does not mean known to the buyer alone or to the seller alone but to persons generally. There is no evidence or finding that the property “known as” The Eastington Hall Estate included the dog garden with the flagstones. Indeed, not even the outline of the dog garden is shown on the plan of the property filed at the Land Registry. Moreover, the contract contains no warranty about the flagstones. No relevant implied term is alleged. As already explained, the flagstones were not “land” at the date of the contract.
39. In addition, for Mr Ticciati’s submission to be correct, “the property” must mean, in relation to the dog garden (at least), that garden in the state in which it stood at the date of the buyer’s inspection. The difficulty about this is that that interpretation produces a conflict with the National Conditions of Sale referred to above. They include Standard Condition 3.2.1 which provides that “The buyer accepts the property in the physical state it is in at the date of the contract”. The presence or absence of flagstones is something which, in my judgment, pertains to “the physical state”, or condition, of the dog garden at the date of the contract. I do not accept that “state” is a reference only to the condition of repair. There is no ground for reading in any limitation as to the nature of any physical state. There can be a change in the “state” of a property which includes a house if, say, stucco is added to the house as much as if stucco is removed from the house. The physical state under consideration is not that of the flagstones but of the property, specifically, the dog garden. Moreover, the change to its condition did not mean that the dog garden ceased to be a garden at all.
40. Mr Ticciati argued that on this construction a buyer might inspect a plot with (say) an old cottage on it, and then find, after signing the contract to buy the plot, that the seller had sold the cottage to someone else who had removed it, and yet be bound by the contract. I do not consider that this is correct. The buyer would have received particulars of the property referring to the cottage. Standard Condition 7.1.2. (which applies here with, for the purpose of this paragraph, immaterial modification) entitles the buyer to damages if there is a material difference between the property as it is represented to be and as it is, and Standard Condition 7.1.3. entitles him in certain circumstances, for example where a misstatement is the result of fraud, to rescind the contract. But he does not have any such right merely on the basis of inspection. Nor does Standard Condition 7.1 confer any right to return of the flagstones to the position in which they were when the buyer saw the property.
41. It is difficult to see why the buyer should have a remedy if there was no representation. If A wishes to sell his house and he has a greenhouse in the garden (which is of a kind which is a fixture but can be removed), and the particulars of sale do not refer to the greenhouse and there is no representation, by words or conduct, that the greenhouse is included in the sale, why should the greenhouse be included in the sale if he has removed it by the time of the contract? It is not pleaded in this case that there was any relevant representation here about the flagstones in the dog garden, apart from that for which the buyer has already been awarded damages in deceit. (Clause 13 of the contract purports to exclude reliance on pre-contractual representations, but it could not exclude liability for any fraudulent misrepresentation). As Blackburn J said in Smith v. Hughes (1871) 6 LR QB 597 at 607:
... whatever may be the case in a court of morals, there is no legal obligation on the vendor to tell the purchaser that he is under a mistake, not induced by the act of the vendor.
Or, as it is sometimes put, caveat emptor.
42. Standard Condition 5.1.1 (above) is consistent with Standard Condition 3.2.1 but deals primarily with responsibility for damage to the property after the date of the contract which does not arise here. There is nothing in the contract to qualify either of these conditions unless Mr Ticciati’s submission is accepted. Standard Condition 5.2 makes it clear that the buyer will have remedies if the property undergoes a material change after the date of the contract.
43. A further factor against Mr Ticciati’s construction is that the contract contains a clause specifically dealing with fixtures (clause 14) and an entire agreement clause (clause 13). If the parties considered that the term “the property” meant the property at the date of the buyer’s inspection, they would not have taken the trouble to itemise the fixtures which were to pass under the contract.
44. Thus, in my judgment, when the contract is read as a whole, the term “property” cannot bear the meaning Mr Ticciati seeks to place on it.
45. Further, it is (as I have said) part of the relevant factual matrix that the dog garden was not a sufficiently important part of The Eastington Hall Estate to be mentioned specifically in the sales particulars and moreover that the sales particulars do not refer to the flagstones. In fact (though this is not relevant to construction) the buyer did not realise that they had been removed until some two years after completion when there was a dry spell of weather and it became apparent that the grass had been recently laid.
46. I do not accept the argument, which Ms Hargreaves advanced, that, because the buyer was told in the reply to the enquiry before contract that the pile of flagstones, which his solicitor had surmised came from the property, was not for sale, he in any event cannot assert that the property referred to in the contract included the flagstones because he was deemed to rely on such reply by virtue of the concluding words of clause 13. What he also relied on was the contemporaneous representation that the flagstones did not come from the property, in which he was shamefully misled. His reliance on the representation that flagstones which did not come from the property were not included in the sale cannot by any stretch of the imagination amount to reliance on a representation that the flagstones from the dog garden were not included in the sale.
47. I now turn to clause 14, which does not appear in the Standard Conditions. In my judgment that brings into the subject-matter of the contract the “landscaped gardens” situate at the property, including the dog garden, because they were referred to in the particulars. However, the sales particulars do not refer to the flagstones. The dog garden continued to be a “landscaped garden” even after the removal of the flagstones. Clause 14 has to be read with Standard Condition 3.1.1. So read, clause 14 cannot assist the appellant.
48. That leaves clause 8(1), which again does not appear in the Standard Conditions. The judge considered that this would exclude any claim in contract. The principal function of clause 8(1) is to make it unnecessary to disclose to the buyer matters which he would have discovered if he had inspected the property. Although it is not necessary to decide the point, it seems to me that, if I am correct in my interpretation of the contract, the judge was correct in holding that the deemed inspection was deemed to take place immediately prior to exchange of contracts. Moreover, I agree with Ms Hargreaves that it is no answer to say that the removal of the flagstones was not apparent on inspection simply because the solicitor who carried out the inspection in May 1997 had not previously seen the dog garden as the buyer himself had. Nor do I consider it to be sustainable that clause 8(1) has no application because there was in fact an inspection by the buyer himself It would be odd if the buyer could prevent the application of clause 8(1) in that way without any such indication in clause 8(1) itself.
49. The essential problem for the appellant, as I see it, is that the property sold by the contract did not mean the property as it existed at the date of the buyer’s inspection. The application of clause 8(1) only arises if the appellant is correct on the interpretation of the contract. If I had come to the conclusion that the appellant’s construction was the correct construction of the contract, I would have accepted Mr Ticciati’s submission that clause 8(1) could not apply to exclude the buyer’s claim because, in the circumstance I am postulating, namely that the contract included the flagstones, the removal, and (as the judge found) the disguising of the removal, of the flagstones would themselves have been fraudulent: see Pearson v. Mayor of Dublin [1907] AC 351, Lazarus Estates v. Beasley [1956] 1 QB 702. Unfortunately, the judge did not have these authorities before him when he gave his judgment. I would not have been impressed by the argument that this last point was not pleaded before the trial as the respondent had not pleaded reliance on clause 8(1) either.
50. I suspect that clause 8(1) came to prominence as a response to Mr Ticciati’s argument on construction based on the buyer’s inspection of the property. Even if in this case the “property” included the flagstones, because the buyer saw them when he inspected the property, and (as Ms Hargreaves submits) their removal did not involve any fraud, it is difficult to see what role clause 8(1) could have. Mr Ticciati’s interpretation, if correct, would not be met by a notional inspection. If the parties contracted to sell the flagstones, the deemed inspection clause would not operate to prevent the buyer from enforcing the contract This point has not been argued but provisionally it seems to me that as the buyer was not actually aware of the removal of the flagstones he could not be said by virtue of clause 8(1) to have waived his rights under the contract: Peyman v. Lanjani [1985] Ch 45.
51. I have had the privilege of reading in draft the judgments of Sedley LJ and Wall J. It is with great respect that I find myself in disagreement with them. As I understand it, the ratio of their judgments is that the term “property” in this contract is to be interpreted (unless the contrary is agreed) as meaning the property with the fixtures which the buyer saw on his inspection, or reasonably believed to be included in his sale when he made his initial offer. I regret that for the reasons given above I have not been able to deduce this meaning from the contract, read with the background knowledge available to both parties at the time of their contract. Nor for my part do I consider that the contract can be construed on the basis that the buyer has any particular entitlement to be confident that fixtures at the date of his inspection or initial offer are included in the contract, for that as it seems to me depends on the terms of the contract. The fact that the seller gave a deceitful answer to the enquiry before contract does not, as I see it, mean that the contract must now be read against him. Arguments have not been addressed to the practical consequences of the majority view. There may be a considerable period of time between the buyer’s first inspection and the signing of the contract and no certainty in that period that a contract will be signed or who the buyer will turn out to be. It is possible that in future, during the equivalent period, owners will desist from making any changes to their property to which a subsequent buyer may not agree. The position regarding fixtures which the buyer has not seen or noted on his inspection does not arise in this case. It is for future consideration to what extent sellers will be able to avoid the problem by wording in the sales particulars. The judgments in this case are decisions only on the particular contract in this case though there may be others to which similar principles will apply.
52. Finally, I would make these observations. The deceit practised by the seller was deplorable: the basis of property sales, like any other commercial transaction, has to be trust and the seller’s deceit in the answer to the enquiry before contract fell below the standard of behaviour which the buyer was entitled to expect. That said, in ordinary domestic conveyancing, it is common practice for the contract to make express provisions about fixtures and fittings, and I note that the sales pack, which solicitors following the Law Society’s National Conveyancing Protocol (fourth edition) make available to their clients, provides for the seller to specify by list the fixtures and fittings he will be leaving or removing from the property and indeed provides that it is the seller’s responsibility to do so. It is then for the buyer to check this list. That procedure may have led to clause 14 in the contract in this case: there is no evidence on this. The seller’s responsibility may be made legally enforceable by an appropriate enquiry before contract. If that procedure is rigorously carried out, the situation which occurred in this case may never arise again.
53. In conclusion, I would dismiss this appeal.
54. I have had the advantage of reading in draft the judgments prepared by Sedley and Arden LJJ. Whilst I am naturally diffident about disagreeing with Arden LJ on a point of law relating to the interpretation of a contract for the sale of land, I am in full agreement with the judgment of Sedley LJ. I would, accordingly, allow the appeal and grant the appellant the relief set out in paragraph 94 of Sedley LJ’s judgment. I will endeavour to set out how I reach that conclusion.
55. The Appellant’s grounds of appeal in this case are admirably succinct and straightforward. Paragraphs 1 and 2 read: -
1. The learned judge ought to have found that under the contract dated 29 May 97 the Claimant was entitled to have conveyed to him the flagstones laid in the Dog Garden and he was wrong to hold that on the facts as he had found them the effect of clause 8(1) of the contract was to deprive him of that entitlement.
2. The learned judge, if he had found that the Claimant was entitled to the flagstones under the contract, would have, or ought to have, found that the Claimant was entitled to restitution, i.e. the return and relaying of the flagstones, or to damages representing the value of the flagstones removed plus the cost of relaying them.
56. I agree with both grounds. I begin my analysis with clause 14 of the contract between the Appellant and the Respondent, which provides that: -
The Property sold by this agreement includes those items specifically described as being included in the sale in the Sale Particulars Brochure prepared by Messrs Butler Sherborn and Savills annexed hereto and in the first part of the Butler Sherborn schedule annexed hereto but excluding those items shown as excluded by the second part of that schedule.
57. I therefore turn to the brochure advertising the property. Amongst the features described in the brochure are “attractive landscaped gardens”. Whilst this generic description undoubtedly includes the so-called “dog garden”, neither it, nor any of the other gardens is specifically identified. 58. The brochure then draws reader’s attention to the “IMPORTANT NOTICE” at the end of the brochure, which includes the following: -
1. These particulars have been prepared in all good faith to give a fair overall view of the property and must not be relied upon as statements or representations of fact. Purchasers must satisfy themselves by inspection or otherwise regarding the items mentioned below and as to the content of these particulars ...
3. It should not be assumed that any contents / furnishings / furniture etc. photographed are included in the sale, nor that the property remains as displayed in the photographs. No assumptions should be made with regard to parts of the property that have not been photographed ...
6. The information in these particulars is given without responsibility on the part of the agents or their clients. These particulars do not form any part of an offer or a contract and neither the agents nor their employees have any authority to make or give any representations or warranty whatever in relation to this property.
FIXTURES AND FITTINGS
Those items mentioned in these sale particulars are included in the freehold sale. All other fixtures, fitting and furnishings are expressly excluded. Certain items may be available by separate negotiation ...
59. The Appellant duly visited the property and inspected it. His evidence to the judge about the dog garden, which the judge accepted, was that he had only visited it “a couple of times”, as it was “not a natural place to walk into”. He had, however, noticed the flagstones. He described them to the judge as “very beautiful stones with some amount of lichen on them, at the back of the house;” He told the judge he thought the dog garden would be a “lovely place for a Shakespeare play” and described the stones as “sawn, not riven”. He described that as “very unusual. They had been there a long time”.
60. Sadly, the term “dog garden” is not Shakespearean, nor does it derive from Sidney’s Arcadia or Spenser’s Faerie Queene. In the prosaic language of the twentieth / twenty-first centuries it describes where the vendors buried their dogs. Nonetheless, it is clear to me from the evidence given to the judge by the Appellant (and accepted by the judge) that the flagstones set in the earth of the dog garden were a feature of the property which had impressed itself on his mind and was part of the property (with the flagstones in situ) which he intended to purchase. In my judgment, the dog garden with its flagstones in situ was also what was being described in the sales brochure under the generic heading of “landscape gardens”.
61. As I understood the argument, it was common ground that, had the Respondent’s husband not surreptitiously removed the flagstones, and had the purchase otherwise gone through without controversy; (a) the flagstones in situ would have passed to the appellant under the contract and (b) there would have been no specific mention of them (or the dog garden) in the contract itself The garden with its flagstones (in situ) was, accordingly, part of “all the property” identified in Schedule 1 of the contract, namely: -
The Property known as the Eastington Hall Estate comprising Eastington Hall and land formerly part of Whitefields Court Farm and being registered at HM Land Registry with title absolute under title numbers HW97983 and HW 152615.
62. The alternative analysis is that the Dog Garden was part of the property, and the flagstones embedded in the earth of the Dog Garden were fixtures. This analysis does not, however, materially assist in construing the contract, since the flagstones from the Dog Garden are not included in what Arden LJ aptly describes as the “motley list” of fixtures and fittings either included or not included in the sale under clause 14 of the contract.
63. We know that the flagstones were dug up over the weekend of 3-5 May 1997 and an attempt made to disguise the fact that they had been removed by sowing grass seed in the gaps left by their removal. Ms Hargreaves submitted robustly that at this point the Respondent was entitled to do what she liked with her property, and that if she chose to have the flagstones dug up and removed from the property, that was a matter for her. Subject to any question of listed building consent, she must be right about that. But in my judgment what the Respondent plainly could not do when entering into a sale of the property was to lie about what had been done, and then argue that the contract should be construed on the basis that the lie was true.
64. In my judgment, the first of the additional enquiries before contract is crucial to a true construction of the contract itself. Arden LJ has set it out, but it bears repeating. The first question following Mr. Nicholas’ inspection on 21 May 1997, and the answer to it, were in these terms: -
With regard to the pile of paving slabs (between Eastington Hall and the Pond immediately to the west) have these been taken from the curtilage of the Hall? If so, has listed building consent been obtained for this?
Answer: No and they are not included in the sale, but are to be removed by the vendors.
65. In my judgment, the Appellant was entitled to treat that as an honest answer, and to enter into the contract on that basis. Treating it as the truth, it can only have one meaning. This is that the flagstones in question were not flagstones from the dog garden (or for that matter from anywhere else within the curtilage of the property) and that, accordingly, the dog garden, with its flagstones in situ remained part of the property comprised within the contract and passing on sale. It follows, in my judgment, that by failing to convey the property with the dog garden flagstones in situ, the Respondent was in breach of contract.
66. Of course, we know now that the first word of the answer to question I was a lie. But in my judgment the Respondent cannot rely on a fraudulent answer to argue that the dog garden flagstones in situ were not included in the contract when they plainly were. Otherwise, why lie about it? If the dog garden stones had genuinely not been part of the contract, the Respondent would have answered “yes” to question 1. “The stones have been dug up from the dog garden and they are not in the sale.” Why did she not say that? The answer is obvious.
67. Equally, the Respondent cannot escape from the conclusion that the dog garden flagstones in situ were part of the property passing under the contract by reliance on clause 13 (the “entire agreement” clause) since that clause specifically excludes reliance on statements or representations made by the Respondent’s solicitors “in the written replies to preliminary enquiries” and written replies to enquiries made before contract.
68. In rejecting the claim in contract, the judge appears to have relied on clause 8(1) of the contract which provides that: -
The Buyer is deemed to have inspected the Property whether or not the Buyer has in fact done so.
The argument, which the judge does not expand upon, must be that any inspection immediately before exchange of contracts would have revealed that the dog garden flagstones had been dug up and removed from the curtilage of the property and were thus not to be included in the sale.
69. With respect to the judge, I do not see this clause as fatal to the claim in contract on the facts of this case for several reasons. Assuming that the judge was right to hold that clause 8 refers to an inspection immediately before exchange of contracts, the fact is that Mr. Nicholas, the Appellant’s solicitor, did inspect. The removal of the flagstones from the dog garden had been covered up by planting grass seed. The judge accepted that by the date of Mr. Nicholas’ inspection “there was a reasonably green sward”. The removal had thus been deliberately concealed. Despite this, inspection did reveal that some flagstones had been dug up and led to the pre-contract enquiries set out at paragraph 64 above.
70. If a vendor surreptitiously makes a material alteration to a property and then both seeks to conceal it from and lies about it to the purchaser in answer to pre-contract enquiries, he cannot, in my judgment, rely on a clause such as 8(1) to protect him from the consequences of his dishonesty. Applied specifically to the contract under discussion, he cannot use clause 8(1) to say that the purchaser should have uncovered the fraud, discovered the true state of the property on inspection, and appreciated that the flagstones in situ were not part of the property passing under the contract.
71. In my judgment, the principle of caveat emptor does not apply in these circumstances. In Gordon and Another v. Selico Co Ltd and Another [1986] EGLR 71, this court held that a vendor who had fraudulently concealed dry rot could not rely on what was then clause 4(2)(a) of the Law Society’s Conditions of Sale under which a purchaser of property was deemed to purchase “with full notice of its actual state and condition”. At [1976] EGLR 71, 77, Slade LJ, giving the judgment of this court in a powerful constitution (Slade and Woolf LJJ and Sir Denys Buckley) undertook an analysis of Horsfall v. Thomas (1826) 1 H&C 90 and Smith v. Hughes (1871) LR 6QB 597 and stated: -
Both those two cases, however, are distinguishable from the present on their facts. In the former, not only was the defect in the gun patent and discoverable on inspection but the purchaser took no steps to inspect it, so that he did in fact not rely on any misrepresentation as to its condition which might have been made. In the latter case, the vendor did nothing to disguise the character of the oats sold.
In the present case, on the learned judge’s relevant finding of fact, with which we see no reason to disagree, not only was a fraudulent misrepresentation made, which was intended to mislead prospective purchasers of a lease of the property, the misrepresentation did mislead the purchasers, and they acted to their detriment. In these circumstances, it is in our judgment no answer in law to the claim in deceit for the defendants to say that the plaintiffs or their surveyor could have discovered the dry rot on a closer inspection of Flat C or were content to purchase without any warranty as to the condition of the property; they and their surveyor were in fact misled by the cover-up operation, as they were intended to be.
The general proposition caveat emptor has no application where a purchaser has been induced to enter the contract of purchase by fraud.
72. Gordon v. Selico was, of course, an action based on fraudulent misrepresentation and deceit. I nonetheless find it helpful in the construction of the contract in this case, and the passage I have cited seems to me an additional basis for the proposition that clause 8(1) of the contract does not assist the Respondent.
73. It also seems to me that similar considerations apply to clause 3.2.1 of the Standard Conditions of Sale. If, unbeknown to the purchaser, the vendor makes a material alteration to the physical state of part of the property, conceals the alteration and then, in enquiries before contract, denies making it, can he really take advantage of that conduct to insist that what passes under the contract is the property in the condition to which he has reduced it?
74. Finally, I do not obtain any assistance from the defendant’s admitted breach of clause 17 of the contract. It appears to have been conceded below that breach of this clause could not give rise to restitution. Clause 17 did not feature in the argument before us as an aid to the construction of the contract, and speaking for myself I do not find it assists in identifying the property conveyed by the contract.
75. For these reasons, I am of the opinion that the first two grounds of appeal set out in paragraph 2 of this judgment are well founded, and I would allow the appeal on that basis. I should add that in writing this judgment, I have approached the problem with reference only to the particular facts of this case and the particular contract with which we are concerned. It is, on any view, a strong (and, one hopes, untypical) case on the facts. However, I believe that my analysis of the contract fits comfortably with the principles by which contractual documents are nowadays construed, as explained by Lord Hoffmann in I.C.S. Ltd v. West Bromwich Building Society [1998] 1 WLR 896, 912-913.
76. Moreover, I wish to add that I also agree with Sedley LJ’s analysis of the contract (including clause 17) and with the broader approach to the question set out in paragraphs 89 to 93 of his judgment, which seem to me of general application. I find particularly compelling his analysis, in paragraph 93, of the consequences for the vendor of a surreptitious removal of fixtures, which expresses in more concise and elegant language that which I was attempting to convey in various places in this judgment.
77. Mr. Ticciati’s grounds of appeal, have, in my judgment, three major strengths. They are simple, consistent with the facts, and do elementary justice between the parties. They lead me without difficulty to the proposition that the dog garden with its flagstones in situ was part of property passing under the contract.
78. For all these reasons, I find myself unable to agree with Arden LJ’s analysis of the contract. With great respect, she does not, it seems to me, give adequate weight, when construing the contract, to what she herself describes as the “shameful” and “disgraceful” conduct of the Respondent’s husband. Furthermore, that conduct, and its contractual consequences are not, in my judgment, limited to the false answer to the additional enquiries before contract, as Arden LJ appears to suggest in paragraph 50 of her judgment. It includes the previous surreptitious removal of the flagstones and the attempt to disguise the fact that they had been removed.
79. If damages are an inadequate remedy, and if the conduct of the Respondent’s husband has the contractual consequences I believe it has, it is no answer to the Appellant’s appeal in this case to say that his remedy lies in deceit, for which he has been compensated in damages and against which there is no appeal. Furthermore, if there are two legitimate constructions of the contract, I have to say that I prefer that which achieves what I believe to be a just result, and, as Sedley LJ aptly puts it in paragraph 93 of his judgment, prevents cheating.
80. As I made clear in paragraph 75 of this judgment, I have approached this case primarily on its facts. However, if the majority decision in this case does have any wider implications, it seems to me that honest vendors have nothing to fear from it, and that in any contract for the sale of land, mistakes and misunderstandings can be obviated by openness on both side and by sellers and purchasers following the Law Society’s National Conveyancing Protocol, as indicated in paragraph 50 of Arden LJ’s judgment.
81. For all these reasons I remain of the opinion that the contract between the Appellant and the Respondent in this case included the dog garden with its paving stones in situ and that the Respondent’s failure to convey the property in that condition entitles the Appellant to the order for restitution proposed by Sedley LJ in paragraph 94 of his judgment. I would accordingly allow the appeal. Like Sedley LJ, I would hope that the form and content of the order will prove capable of agreement between counsel, and I also agree that any remaining issues on both the incidence and scale of costs should be the subject of argument when the judgments are handed down.
82. A house and grounds are put on the market. A prospective buyer looks them over and decides to buy. Before contracts are exchanged the vendor removes valuable fixtures without telling the purchaser. The purchaser exchanges and completes in the reasonable belief that the property he is buying is the property he was shown. Common sense and common decency both suggest that, if there is no good reason to do otherwise, the law ought to give the purchaser what he was led to think he was getting.
83. Ms Hargreaves, for the respondent vendor, submits that there are two good reasons here for doing otherwise. One is that the terms of the contract exclude the dog garden flagstones from the conveyance. The other is that the vendor’s fraudulent concealment of the fact that they had been removed sounds in tort but has no bearing on the contract. Mr Ticciati, for the appellant purchaser, has not attempted to outflank these arguments, as he might perhaps have done, by arguing that even if his only remedy is for deceit there is still no reason other than novelty why the court should not be able to make an order for their restoration. But in my respectful view neither of Ms Hargreaves’ propositions is sound.
84. The written contract is not self-contained nor therefore self-executing. The “Property” which it conveys has to be identified before the conveyance can have effect. It is described in Schedule 1 to the agreement simply by reference to its Land Registry title numbers. But realty is more than two-dimensional space. It includes things fixed to and forming part of the land, so that to speak of the property is to speak of everything it is composed of On conveyance all of it will pass unless excluded. Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 neither adds to nor subtracts from these propositions.
85. None of the terms of the agreement has, in my judgment, the effect of excluding these flagstones from the sale. The inspection deemed by clause 8(1) to have taken place is designed simply to prevent a purchaser from complaining after purchase of things which a suitably careful inspection would have revealed before purchase. It does not fix the purchaser with imputed knowledge of anything and everything that has happened to the realty up to the moment of exchange of contracts. It certainly does not leave the vendor free materially but silently to alter the realty after inviting the purchaser to inspect it with a view to making an offer. If Ms Hargreaves were right, the appellant could not have complained if he had found after completion that the superb Jacobean strapwork ceiling in the drawing room had been removed just before exchange of contracts.
86. The fixtures and fittings clause, clause 14, affords no help either in its terms or by reference to the somewhat eccentric schedule of excluded and included items which in the event was annexed to it. The flagstones are not mentioned, and it gives no other help in identifying the composition of “the Property”.
87. The entire-agreement clause, clause 13, fads in my judgment to assist the respondent for two reasons. First, it assumes, without further defining, an identified property as the subject matter of the contract. This simply takes us back to the issues I have already discussed. Secondly, it is made expressly subject to the vendor’s answers to enquiries. Here the vendor mendaciously answered that the stacked flagstones seen by the purchaser’s solicitor had not been taken from the curtilage of the property, and in reliance on that untruth the claimant went ahead with the purchase.
88. Arden LJ refers in her judgment to clause 17. This reads “The Seller shall on or before completion provide the Buyer with whatever details are known to or available to the Seller regarding the works alterations additions and refurbishments that have been carried out to the Property during the Seller’s period of ownership.” It was not argued before us, as it might possibly have been, that this was an aid to the construction of “the Property”, perhaps because the vendor’s admitted breach of it made it difficult for her to rely on it. But the argument is in any case unsatisfactory, since the obligation, although it starts from the date of the vendor’s acquisition of the premises, terminates at an unspecified date before completion of the vendor’s choosing. The defendant could thus have accurately said, shortly after exchange of contracts, that there had been no material alteration and the following day have removed the flagstones (or for that matter the strapwork ceiling) without breaching clause 17.
89. What gives more pause are clauses 3.2.1 and 5.1.1 of the third edition of the Standard Conditions of Sale. But critical to both, in my judgment, is the dichotomy of the property and its physical state. The property is given; its physical state is variable. The effect of the two clauses is to place the risk of variation in the physical state of the property (other than fair wear and tear) upon the purchaser up to exchange of contracts and upon the vendor from then until completion. These provisions are simple and reasonable. But in respectful disagreement with what I understand to be Arden LJ’s central ground for dismissing this appeal, I do not consider that either clause trenches upon the crucial but prior question: what is the property?
90. As to this question, I consider that Mr Ticciati’s submissions afford a straightforward answer which house-buyers and -sellers as well as lawyers can readily understand. In the manner seminally described by Lord Hoffmann in Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 MR 896, 912-3, the meaning to be ascribed to “the Property” in the conveyance is the meaning it would be given by a reasonable person who knows what the parties knew at the time they contracted. This, of course, begins with the geographic area comprised in the registered titles. On Judge Bursell’s findings, it includes the facts that the claimant had been shown premises which included the flagged dog garden and that he had not been told before contract that this was no longer part of the realty. In my judgment such facts are not within the exclusion zone of prior negotiation and subjective intent described in Lord Hoffmann’s third principle in I.C.S. (above). They are the normal means by which the subject matter of any offer and acceptance is identified.
91. This would probably be enough, as Mr Ticciati submits it is, to make the flagstones part of “the Property” for which the parties went on to exchange contracts. But here, additionally, the vendor deliberately induced the buyer, through his solicitor, to believe that there had been no such alteration. To Arden LJ’s question: why tell this lie? Ms Hargreaves had no answer.
92. Against this background of fact any reasonable person, in my judgment, would have understood the property which was being bid for and contracted for to include the flagstones in the dog garden. The case falls outside the caveat emptor paradigm described by Arden LJ in paragraph 41 of her judgment, because the vendor, by his conduct in inviting an offer for the property as shown to the purchaser and without any explicit subtraction from it, represented that it was to include the flagged garden.
93. In everyday house purchases people are entitled to be confident that, unless some different agreement is reached and recorded, the property which is to pass includes its fixtures. If before the sale takes place the seller has given the buyer no reason to think that the fixtures (at least those the buyer knows of) are not part of the premises for which an offer is being invited, simple morality says that he cannot remove them without telling the buyer that they are no longer for sale. To fail to do so is to invite a bid for something which is no longer what the bidder still reasonably believes it to be: not to put too fine a point on it, it is cheating. Surreptitiously removing fixtures does not mean that the seller is stealing them, for they are his. It means that if the sale goes through he will be failing to convey what the eventual buyer has become entitled to have conveyed. It may not answer the perennial problem of vendors who take the light bulbs and the garden plants with them, but it seems to me to answer the present case and cases like it simply and clearly and ethically. If so, it is satisfactory that it answers the case legally as well.
94. For my part, accordingly, I would allow this appeal and order the respondent to restore the flagstones to their former location in the dog garden or to indemnify the appellant for the cost of doing so. There is no evidence to suggest that they can simply be replicated by a fresh purchase: rather the contrary. The form and content of the order should if possible come by agreement from counsel. To the extent that they are not agreed, the incidence and scale of costs here and below will fall to be argued on the handing down of judgment.