Purchase of council maisonette under right to buy scheme – Subsequently unsaleable because of notoriously defective pre-fabricated construction of block – Whether sufficient disclosure made by council in offer purporting to comply with section 125 Housing Act 1985
In 1979 the plaintiffs became weekly council tenants of a maisonette in an estate in Edgware, Middlesex, comprising low-rise blocks constructed according to a Large Panel System (LPS) which had gained notoriety following the Ronan Point disaster in 1968. In 1985 a specialist report (the FB report) pointed to numerous external defects and advised the council to investigate the system design. In May 1987 the council, operating under the right to buy scheme, served a notice under section 125 of the Housing Act 1985 offering the maisonette to the plaintiffs on a long lease at a price based on a market value of £32,000, being a net price (after statutory discount) of £12,800. The same notice, which by subsection (4A) had to describe “any structural defect known to the landlord”, specified various heads of expected expenditure on the block: these included, investigation of structural components (£4,500); “assume structural repairs required” (£28,000); remedial structural work to walkways (£12,000). In September 1987 the council commissioned a further report (the GH report) to determine whether the estate suffered from a “deep-seated” design problem. In June 1988 GH reported that some £570,000 would have to be spent to provide a relatively maintenance-free life of over 20 years. In August 1988 the plaintiffs completed the purchase of the maisonette with the aid of a 100% building society mortgage, hoping for a profitable resale three years later. Towards the end of 1991 extensive remedial works were carried out on the block. Subsequent attempts by the plaintiffs to sell proved fruitless as mortgagees’ without exception were refusing to lend on LPS properties. In 1995 the plaintiffs brought proceedings claiming damages and/or rescission for misrepresentation, material non-disclosure, breach of statutory duty and negligence contending, inter alia, that they would not have bought if the contents of the FB report had been disclosed. The council applied successfully to have the proceedings struck out for disclosing no cause of action and for being brought outside the six-year limitation period. The plaintiffs appealed.
Held The appeal was allowed.
1. The purpose of the disclosure duty imposed by subsection (4)(A) did not, in the light of its legislative history, go beyond that of limiting any future obligation under the lease to reimburse the landlord for remedying defects whether or not amounting to disrepair as such. The section did not relieve the plaintiff of the task of engaging his own surveyor nor did it place the council under a duty of care on which to found an action in negligence.
2. Since the duty was limited to defects actually known to the council the plaintiffs could not base their case on the FB report since, apart from the matters specified in the section 125 notice, it merely raised the possibility of more fundamental defects.
3. However, since there was some possibility, albeit unlikely, of proving actual knowledge at the material time it was to early to declare (at a pre-discovery stage) that it was “clear and obvious ” that the claim could not succeed. The trial of that matter was a necessary preliminary to any ruling whether the limitation defence was countered by the plaintiffs showing deliberate concealment by the council or delayed awareness on their part.
Roger Henderson QC and Martin Seaward (instructed by Hodge Jones & Allen) appeared for the appellant /plaintiff; Andrew Arden QC and Jonathan Manning (instructed by the solicitor to Barnet London Borough Council) appeared for the respondent/defendants.
