Gran Gelato Ltd v Richcliff (Group) Ltd
High Court
Citations: [1992] Ch 560; [1992] 2 WLR 867; [1992] 1 All ER 865;[1992] 1 EGLR 297.
Facts
The claimant was negotiating to acquire 10-year underlease from the first defendant for use in business. The claimant’s solicitors sent several inquiries to the second defendant (the first defendant’s solicitors). One of these inquiries was whether there were any rights under the superior leases which might affect the claimant’s enjoyment of the underlease. The second defendant responded ‘not to the lessor’s knowledge’. In reality, the superior leases contained break clauses which might cause the underlease to terminate after 5 years.
The claimant entered into the lease and began trading. The business did not do well, and after three years the claimant stopped trading. However, they were unable to sell their underlease because of the break clauses. After five years, the head-lessor used the break clause and forced the claimant off of the property. The claimant sued the defendants for misrepresentation at both common law (negligent misstatement) and under s.2(1) of the Misrepresentation Act 1967.
Issue(s)
- Did the second defendant owe the claimant a duty to exercise due care in answering their inquiries?
- Could the defendants rely on the defence of contributory negligence?
Decision
The High Court held that the second defendant’s response to the claimant’s inquiry was an actionable misrepresentation. The claimant relied on this misrepresentation when deciding to enter the underlease. However, they could only claim against the first defendant. This was because the second defendant did not owe the claimant a separate duty of care. The contributory negligence argument failed.
This Case is Authority For…
In normal conveyancing transactions a seller’s solicitors do not owe purchasers a duty of care. They do, however, act as the seller’s agent. This means that any statements they make can be attributed to the seller for the purposes of misrepresentation. The seller owes the buyer a duty not to make negligent misstatements.
Where a defendant is sued for misrepresentation both at common law and under the statute, contributory negligence can in theory apply to both. However, where the defendant made a misrepresentation intending the claimant to rely on it, they cannot normally rely on contributory negligence.
Other
Sir Nicholls VC noted that there might be some cases where the seller’s solicitors owe a buyer a duty of care, particularly where they assume responsibility for the accuracy of their statements.
The measure of damages under the Misrepresentation Act 1967 ‘is that sum of money which will place the plaintiff in the position he would have been in if the representation had not been made.’
