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Promises to the Future and the Property Misdescriptions Act: Lewin v Barratt Homes Limited.

First published in the Justice of the Peace (2000) 164 JPN 76.

Back to the Future

The ambit of the concept of promises to the future was explored in the author’s previous article, “Promises to the Future: Goods and Services and the Trade Descriptions Act”, published back in (1997) 161 JPN 956.  That article traced the origins of the promises to the future doctrine from Beckett v Cohen (1973) 137 JP 116; [1972] 1 WLR 1593 and R v Sunair Holidays Limited (1973) 137 JP 687; [1973] 1 WLR 11105 through to its consideration by the House of Lords in British Airways Board v Taylor  (1976) 140 JP 96; [1972] 1 WLR 13.  Those authorities all concerned s 14 of the Trade Descriptions Act 1968 (“TDA”).  The application of the concept to goods, and hence to s 1 of the TDA, in the then recent case of Shropshire County Council v Simon Dudley Limited  (1997) 161 JP 224, was also discussed.

The Property Misdescriptions Act 1991

Section 1(1) of the Property Misdescriptions Act 1991 (“PMA”) provides:

“Where a false or misleading statement about a prescribed matter is made in the course of an estate agency business or a property development business, otherwise than in providing conveyancing services, the person by whom the business is carried on shall be guilty of an offence under this section.”

S 1(5) of the PMA provides, inter alia:

“(a) ‘false’ means false to a material degree,

(b) a statement is misleading if (though not false) what a reasonable person may be expected to infer from it, or from any omission from it, is false,

(c) a statement may be made by pictures or any other method signifying meaning as well as by words and, if made by words, may be made orally or in writing”.

S 2(1) provides a defence if the accused can show “ that he took all reasonable steps and exercised all due diligence to avoid committing the offence”.

The applicability of the promises to the future doctrine to the PMA was considered, for the first time by the High Court, in Lewin v Barratt Homes Limited (1999) CO/3537/99.  Barratt Homes Limited (“Barratt”) were property developers within the meaning of the PMA and they built private houses.  In May 1997, a prospective purchaser visited a Barratt site office.  He was shown a picture of a design of house called the “Maidstone” and he followed the suggestion of Barratt’s site negotiator that he view their Maidstone show house located some twenty miles away.  In July 1997 a second prospective purchaser was shown a similar picture and was also invited to view the Maidstone show house.  He “fell in love with it”. Both prospective purchasers agreed to buy a Maidstone house.  They each paid a deposit on exchange of contracts. The houses, when built, were materially different from the show house and the one pictured but each of the two prospective purchasers felt obliged to complete their purchase for fear of losing their deposit.  The prosecution alleged that Barratt had, firstly “by means of a picture of the Maidstone house”, and secondly “by means of a suggestion” to visit the Maidstone show house, made false and, in the alternative, misleading statements as to a prescribed matter namely the physical or structural characteristics of the front aspect of the house.  The lay out and size of the front windows, which the purchasers had been shown, were not reproduced in the houses built for them.  The house shown also had rendering to the top floor wall and a gable roof over one window whereas the ones built did not.

The factual defence put forward at the trial before the magistrates was that the statements had been disclaimed by a small sticker on the picture stating: “Details of this property have been amended. Please refer to site negotiator for details”. Reliance was secondly placed on a notice below the picture, stating that visual depictions could not be relied upon, and thirdly on a framed A4 size document warning that there might be a difference between the accommodation depicted and that on offer.  The magistrates found that the statements had not been effectively disclaimed.  They also rejected the statutory defence raised under s 2 of the PMA.  Further, the magistrates rejected Barratt’s submission that the informations were duplicitous for merging to two distinct paragraphs of the Schedule to the Property Misdescriptions (Specified Matters) Order 1992, which sets out what constitute “prescribed matters” for the purposes of the PMA.  The prosecution had referred to two prescribed matters in each information mentioning both the front “aspect” and the “physical or structural characteristics” of the house.  Simon Brown LJ referred to this third submission at the subsequent appeal as being of a “highly technical and unmeritorious character”.

There was, however, one point upon which the magistrates did agree with Barratt, namely that the statements, whether false or misleading, were promises to the future and as such not caught by the PMA.  The informations were accordingly dismissed and the prosecutor appealed.

Lewin v Barratt – the appeal

The case stated by the magistrates asked two questions: “(a) Were we right in determining that statements within the meaning of s 1(1) of the [PMA] must be as to existing fact.  (b) Were we right in determining that the statements made to [the two purchasers] were mere promises to the future and not also statements of existing fact”.  The House of Lords in British Airways Board v Taylor (ante) had endorsed Widgery LCJ’s view in Becket v Cohen (ante) that “if before the contract has been worked out, the person who provides the service makes a promise as to what he will do, and that promise does not relate to an existing fact, nobody can say at the date when the statement is made that it is either true or false. … Parliament never intended [that the TDA] should be used … to make a criminal offence out of what is really a breach of warranty”.  On appeal in Barratt the prosecution sought to distinguish the s 14 cases on the basis, in particular, that the PMA only applied to estate agency and property development businesses.  As the latter frequently offered houses for sale prior to their construction, it was argued that it would deprive the PMA of much of its efficacy if it were not to apply to statements which could be characterised as promises to the future.  That contention failed.  Simon Brown LJ said: “Plainly the magistrates were right in deciding that a statement cannot offend against s 1(1) of the [PMA] unless it is a statement of existing fact.  The position is no different to that arising under s 14(1) of the [TDA]”.

The prosecutor’s appeal was, however, successful on the second point of law ((b) above).  Simon Brown LJ noted that Meckenna J in R v Sunair Holidays Limited (ante), agreeing with Widgery LCJ in Becket v Cohen (ante) said that “neither [a] prediction nor [a] promise can be said to have been true or false at the time when it was made”.  The magistrates had therefore made contradictory findings when they found that false or misleading statements had been made and yet that those statements were mere promises.  “How can that be, given that a promise cannot be false”.  What the magistrates had probably intended to say was that they would have regarded the statements made as false or misleading had they not been mere promises. 

The real question was “were these statements indeed mere promises to the future, or did they not by implication contain a statement of present fact, a representation that [Barratt in their dealings with the two purchasers] were intending and able to build Maidstone houses to the designs they were showing customers?”  Before considering the answer to that question it is worth reminding ourselves, as Simon Brown LJ did, of what Lord Edmund-Davies in British Airways Board v Taylor (ante) referred to as the “admirable judgment [of Mackenna J] in R v Sunair Holidays Limited:

‘A promise or forecast may contain by implication a statement of present fact.  The person who makes the promise may be implying that his present intention is to keep it or that he has at present the power to perform it.  The person who makes the forecast may be implying that he now believes that his prediction will come true or that he has the means of bringing it to pass.  Such implied statements of present intention, means or belief, when they are made, may well be within s 14 and therefore punishable if they were false and were made knowingly or recklessly.  But if they are punishable, the offence is not the breaking of a promise or the failure to make a prediction come true.  It is the making of a false statement of an existing fact, somebody’s present state of mind or present means’.”

An important fact in the Barratt case was that, some four months before the offending statements were made to the first of the two purchasers, changes were made to the planning consent in relation to the Maidstone design which could not therefore be built so as to resemble the picture or show house.  It follows that at the time they made their promises Barratt knew that they could not be fulfilled.  Simon Brown LJ concluded that if there was an implicit statement that Barratt would build the Maidstone houses to the design shown to the customers “then plainly it was false.  Ever since January 1997, the respondents had known perfectly well that they could no longer build to the design shown, and that, presumably, is why they had a sticker below the picture of a Maidstone house, stating ‘Details of this property have been amended.  Please refer to site negotiator for details.’  To my mind it seems quite obvious that by showing prospective purchasers pictures of a Maidstone design and the show house itself, the respondents were stating that that was how they proposed to build the houses.  That, in other words, was their present intention and so far as they knew nothing stood in the way of it”.  The Barratt case therefore confirms, albeit without any reference to it, what the House of Lords said (per lord Edmund-Davies) in British Airways Board v Taylor (ante): “An assertion of existing fact and a promise of future conduct may be found in one and the same statement”.

False or misleading

The prosecution having laid four informations alleging that the statements were false and four in the alternative alleging that they were misleading, the question arose as to which matters the High Court should send back to the magistrates with a direction to convict. It is apparent that the High Court considered the statements to be both false and misleading.  As already noted Simon Brown LJ said of (each) statement “plainly it was false”.  On the question of which matters to remit he said: “Plainly they are alternatives, either false or misleading.  Frankly, it does not seem to matter a fig which it is”.  In the event, by agreement, the magistrates were directed to convict on “misleading”.

Validity of the informations

Barratt unsuccessfully sought to win the day at the appeal by asserting that the informations, as laid, were bad because they charged only a statement as to how the houses would be built and made no allegation as to Barratt’s present intention or ability to build them in that way.  Simon Brown LJ said that to his mind “that argument is not merely unmeritorious but quite unreal”.  Barratt were not “disadvantaged in the way they were putting their case.  On the contrary, their factual defence was that bearing in mind the disclaimer notices … the purchasers should have realised that they were not going to get the precise design shown to them.  Nor … is there the least doubt that any inadequacy in the form of these informations was covered by section 123 of the Magistrates’ Courts Act 1980.  This provides:  ‘(1) No objection shall be allowed to any information or complaint … for any defect in it in substance or in form, or for any variance between it and the evidence adduced on behalf of the prosecutor … at the hearing of the information’”.

Newman J, who agreed with the judgment of Simon Brown LJ, noted that the magistrates were having to deal with an area of law more complex than they would be used to and that “it is in the interests of justice that they should receive as much help as possible. … Had [the respondent’s point about the adequacy of the informations] been taken at the outset of proceedings before the magistrates [rather than at the end] and in my judgment, it was a threshold question, no evidence being required, it could have been considered … the magistrates would have benefited enormously from the clarification which that argument would have provided to them as to the issues in the case. … [All points should be] taken as clearly as possible and at the appropriate time.  That will serve not only to assist the magistrates, but serve in the wider interests of justice in securing that appeals do not have to be pursued in cases where … there was really no answer to the matter”.

Effectiveness of disclaimers

The High Court in Barratt did not have to consider whether the sticker on the Maidstone picture or the notices on the site office wall were capable of disclaiming the statements made by the picture or the invitation to visit the show house.  The magistrates had found that the statements “had not been effectively disclaimed by any contrary statement made” and that finding was not challenged on appeal.  The doctrine of disclaimer originates in TDA case law and it is worth considering its applicability to the PMA. 

In Norman v Bennett (1974) 138 JP 746; [1974] 3 All ER 351, Widgery LCJ, set out his much cited test for determining when a disclaimer is an effective defence to a charge of supplying goods to which a false trade description was applied contrary to s 1(1)(b) of the TDA:“Where a false trade description is attached to goods, its effect can be neutralised by an express disclaimer or contradiction of the message contained in the description.  To be effective, any such disclaimer must be as bold, precise and compelling as the trade description itself and must be as effectively brought to the notice of any person to whom the goods may be supplied.  In other words, the disclaimer must equal the trade description in the extent to which it is likely to get home to anyone interested in receiving the goods”. 

Widgery LCJ’s dicta was approved by the Court of Appeal in R v Hammertons Cars Ltd [1976] 3 All ER 758 where Lawson LJ said:  “If dealers do not want prospective purchasers to take any notice of mileometer readings, they must take positive and effective steps to ensure that the customer understands that the mileometer reading is meaningless”.  In Barratt the magistrates found that the purchasers did not recall anything being brought to their attention to indicate that the Maidstone houses to be built for them would differ from those shown to them. 

In finding that the statements “had not been effectively disclaimed” it is apparent that the magistrates had considered Widgery LCJ’s test and found that the statements had not been “neutralised” by the disclaimers.  They might have gone further and found that disclaimers were not applicable in the circumstances of Barratt on the principle that a person cannot disclaim his own fraud.  The Widgery test relates to supplying offences where a trader buys falsely described goods in good faith and passes them on declaring what he knows about them.  As Lane LCJ put it in R v Southwood (1987) 151 JP 860; [1987] 3 All ER 556: “[In relation to a ‘supplying’ allegation under s 1(1)(b)] the defendant who by making inquiries discovers the falsity of a reading would no doubt be able to protect himself by frankly disclosing the result of his enquiries in such way that any purchaser would be in the same state of knowledge as the dealer himself”.  In relation to an offence of applying a false trade description contrary to s 1(1)(a) of the TDA the position is quite different.  Lane LCJ considered that “the ‘disclaimer’ ... would be saying: ‘This is a false trade description.  I assert that it is a false trade description, and because I assert that it is a false trade description it ceases to be a false trade description applied to goods, and consequently I am not guilty of a contravention of s 1(1)(a).’  The assertion does not cause the description to be any less false than it was originally, nor does it cause the description to cease to be applied to the car.  It seems that on the strict wording of the Act, therefore, the so called ‘disclaimer’ provides no defence to a person charged under s 1 (1)(a). … It is not open to a person charged under s 1(1)(a) to rely on any disclaimer.” 

In Barratt the defendant was not supplying houses acquired by them with false or misleading statements applied by another party.  Rather, they made (and by analogy with the TDA “applied”) the false or misleading statements themselves.  A disclaimer defence was accordingly not open to them.  For Barratt’s picture of the Maidstone not to have been a false statement it would have required the amendment of the features no longer available or at least a clear and prominent (i.e. unmissable) note on the picture itself highlighting all the features which would not be included on Maidstone houses yet to be built.  It is not, of course, a good marketing ploy to show prospective purchasers a picture of a house whilst simultaneously making it clear that the house actually on offer is devoid of the attractive features shown.  It is, therefore, far better for a developer to picture the house as it knows it is intended to be built.  Quite simply, all Barratt had to do was to tell the truth.

VICTOR SMITH

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