MJ O'Connor Solicitors

Sean Nolan highlights the recent significant High Court decision in David Walsh -v- Jones Lang Lasalle Limited. 

 

In 2000 the plaintiff purchased a property for business and investment purposes and paid a consideration in excess of £2.3M. The plaintiff intended to let the property in units to commercial tenants. The seller retained the well known firm of auctioneers, Jones Lang Lasalle Limited, to sell the property. The auctioneer prepared a sales brochure which included particulars of the total floor area, which was represented to be 23,057 square feet, with the particulars of each floor of the building also being set out in the brochure. 

 

Based on the information as to the dimensions referred to in the sales brochure the purchaser calculated that the total rental income which could be generated from the property was likely to be approximately £320,000 per annum and he estimated that the overall value of the property to be in the region of £2.5m. Accordingly the purchaser offered to purchase the property based upon the floor areas as stated in the sales brochure. Although the purchaser had the property surveyed as to its condition, in accordance with his usual practice, he did not arrange for the surveyor to verify the accuracy of the size of the property, as described in the defendant’s sales brochure. In fact, the purchaser’s surveyor’s report relied on the measurements as set out in the sales brochure.

 

Following completion the purchaser discovered that the total floor area of the property was in fact 1,817 square feet (approximately 20%) less than what was represented in the auctioneer’s sales brochure. When the purchaser discovered the misstatement as to the size of the property he issued legal proceedings in the High Court against the auctioneer with a view to being compensated for the loss of income based on the reduction in the value of the premises and the amount of the lost rent. 

 

The auctioneer sought to rely on an exclusion clause contained in small print at the bottom of the front page of its sales particulars which stated:

 

 

The defendant also argued that irrespective of its disclaimer it did not owe a duty of care at law to a prospective purchaser and could not be held liable under the law of negligence (there being no contract between the auctioneer and the purchaser).

 

The High Court held that exclusion clauses of the kind included in the auctioneer’s sales brochure are frequently used by reputable auctioneers and while prudent purchasers should, where possible, measure floor areas and carry out detailed inspections before purchasing properties the Court was satisfied on the evidence that where detailed and precise measurements of commercial properties are provided within sales brochures of experienced and reputable auctioneers it is the practice for perspective purchasers, at least in Dublin, to rely upon the accuracy of those measurements subject to potential minor miscalculations. The Court held that there had been a gross inaccurate publication of the measurements of the floor area and that the defendant ought to have known that the plaintiff and other prospective purchasers to whom the brochure was directed would rely upon, and be influenced by, the measurements. The Court held that the exclusion clause was insufficient to relieve the defendant of its liability, in this case, and as the miscalculations were not of a minor nature it determined that there was a duty upon the auctioneer to ensure that the information which it provided for the alleged benefit of interested purchasers was reasonably accurate in the circumstances. The Court left open the possibility that an auctioneer might be able to sufficiently exclude its duty of care but in order to do so it would have to draw to the attention of all prospective purchasers the fact that the seemingly precise measurements published in the sales brochure were likely to be wholly unreliable and should not be relied upon in any circumstances. By including within its small print the statement that it had taken care in the preparation of all the particulars within the brochure but advising the purchasers to satisfy themselves as to the correctness of the information given this was insufficient in the circumstances to discharge its obligation or to exclude its liability. Accordingly the plaintiff was awarded a sum of €350,000 in damages to compensate him for his loss.

 

It remains to be seen in further cases the extent to which auctioneers can successfully disclaim their duty of care to purchasers concerning reliance on the accuracy of the floor area. The Court left open the possibility that there may be circumstances where an auctioneer, through an appropriately worded disclaimer, can successfully exclude its duty of care. It would be reasonable therefore for auctioneers to review and give consideration to the precise terms of their existing exclusion clauses and amend same so as to satisfy this planning opportunity. 

 

This case related to a purchase of commercial property which was for sale in a competitive context where only one potential purchaser would succeed. In such circumstances the Court accepted it would not be unreasonable for potential purchasers not to go to the additional expense of commissioning independent site and floor calculation surveys. It remains to be seen whether in a non-competitive bidding situation a Court would negatively construe a purchaser’s failure to verify the accuracy of the sales dimensions by commissioning its own independent report. In certain situations there may be scope for argument that by not commissioning such a report the purchaser was guilty of contributory negligence by wilfully closing his eyes to risk.

 

The author would like to acknowledge the contribution of his assistant, Ms. Carolin Schlauer, in the preparation of this report.

 

 

For further information contact Sean Nolan at