What was your rash lockdown purchase? A disobedient puppy now costing you hundreds of pounds a week in dog walker fees? A Peloton with 3 years’ subscription which guiltily gathers dust in the corner of your spare room? Or a plot of ancient woodland in the Oxfordshire countryside with no development potential bought in an online auction?
Co Mayo Estates Ltd v Hidden Gem Ltd
The case of Co Mayo Estates Ltd v Hidden Gem Ltd concerns the latter. The Defendant was a small family company owned by a medical GP, Dr Raman Prabu, and his wife and children. At an online auction on 9 September 2020 Dr Prabu was the winning bidder for three plots of woodland in countryside outside of Henley on Thames at a total cost of £26,539 sold by the Claimant, Co Mayo Estates Ltd being an Irish company.
The auction particulars stated the following:
“The plots provide the opportunity to buy a substantial yet manageable parcel of land in this locality with each plot benefiting from road frontage along its northern boundary to Stoke Row Road. Currently each plot is mainly woodland with a variety of species but clearly offers a number of opportunities for a purchaser to consider alternative uses or even development of each plot, subject to the necessary consents. Buyers are deemed to rely solely on their own enquiries with regard to any development potential that may exist but are invited to utilise the computer generated image shown in these particulars as an idea to take forward pre-application planning advice with the local authority.”
The particulars were illustrated with, amongst other photos, two CGI images showing residential dwellings in a wooded area. These were marked “Indicative CGI only (STPP)”.
The reader probably knows where this story is going. Dr Prabu had made his bids on the plots having undertaken minimum due diligence, swayed by the CGI images and the seemingly cheap prices for such potentially valuable sites. Following the virtual gavel falling he took formal pre-application planning advice and became aware that the plots which he was by then contractually obliged to purchase were not the potentially lucrative development opportunity he had been expecting. All 3 plots were protected “ancient woodland” which had been wooded continuously since 1600AD and there was no prospect of planning permission for development ever being granted.
When completion did not occur the Claimant claimed for various unpaid deposits and other costs and the Defendant counter-claimed for refund of the deposits it had paid on the basis of misrepresentations made in the auction particulars, namely the CGI images and references to “potential” and facilities which future residential occupiers could enjoy.
The initial trial judge found in favour of the Claimant and the Defendant appealed, disputing the finding that the Claimant was not in a stronger or better position than the Defendant to know the true facts about the planning position, which could have been ascertained by either party from the local planning authority and also re-asserting that misrepresentations had been made.
The appeal judge again found in favour of the Claimant, finding:
- No reason to overturn the trial Judge’s finding of fact that the Claimant was not in a stronger position to know the true planning position than the Defendant. The Claimant did not have any relevant knowledge or source of knowledge about the planning status of the land which were not readily available to the Defendant.
- The sales particulars read as a whole have the clear meaning that the vendor is not making any representations about development potential with wording such as the buyer is “deemed to rely solely on their own enquiries” giving further weight to this.
- The CGI images, whilst potentially encouraging unwise speculation, were marked “STPP” (a commonly used abbreviation for subject to planning permission) and the advertisement went on to explain that their proposed use was as a subject for pre-application planning advice.
It is arguable that the decision is harsh on the Defendant given that the Claimant had itself bought the woodland (presumably going through a more rigorous due diligence process than the purchaser in an online auction would ordinarily do) and then divided it into plots, arranged for the CGI images to be created and listed them in an online auction. You would have thought that at some stage along the line the Claimant would have thought fit to carry out some basic enquiries as to the development potential of the land that they were selling (not least because if there was genuine potential for residential development then this would be a major selling point and add material value to the plots). The method of disposal (online auction) would also suggest, maybe unfairly, that the target market for the plots was naive purchasers.
SPS Groundworks & Building Ltd v Mahil
On its face the decision is also hard to reconcile with another recent case concerning misrepresentation at auction, SPS Groundworks & Building Ltd v Mahil. That case concerned disclosure of an overage obligation which affected the land (requiring the owner to make a payment to a former owner on a future event occurring, being grant of planning permission). The overage obligation was disclosed in the documents of title contained in the downloadable legal pack but not in the particulars in the auction catalogue. On appeal the Judge found in favour of the Buyer and that a misrepresentation had been made. The Vendor should have ensured that the defect of title was described in the sales particulars as well as in the legal pack documents.
The key distinguishing factor appears to be that in SPS there was no dispute that the Seller knew about the overage clause; it/the auctioneer just chose not to shine a light on it in the sales particulars. In Co Mayo Estates it was accepted by the Court that the Seller knew nothing more about the true planning position than the Buyer and as such no misrepresentation had been made.
So what lessons can we learn from these cases?
For a buyer at auction (online or otherwise) the obvious advice is to proceed with caution and carry out as much due diligence as you can in the time available. There are even free online resources which a buyer can make use of such as the map showing all designated Ancient Woodland available on the Natural England website. Also beware when an auction pack contains no up to date search results or replies to standard enquiries from the buyer. When the documentation provided in the auction pack is minimal it will be difficult to prove in the future that the vendor was withholding information. It could be a case (as in Co Mayo Estates Ltd) of a seller who knew very little about the property selling to a buyer in the same position.
For a seller, it is best to be as transparent as possible in the sales particulars to avoid getting wrapped up in potential costly and lengthy litigation. Burying bad news in the legal pack or making suggestions of unlikely development potential may seem tempting options but can lead to unhappy and litigious buyers down the line.
This article is for general purpose and guidance only and does not constitute legal advice. Specific legal advice should be taken before acting on any of the topics covered. No part of this article may be used, reproduced, stored or transmitted in any form, or by any means without the prior permission of Brecher LLP.
