Judgement in the case of The Crown Estate Commissioners v Wakley and Wakley was handed down yesterday. It illustrates the importance of landlords providing accurate responses to prospective tenants during viewings and agreeing the terms of any subsequent agreement carefully, particularly where a tenant's initial experience on the holding has been difficult.

The case

Mr and Mrs Wakley moved their business and family from Aberdeen to Somerset to take on a Crown Estate farm tenancy in 2007. On their initial viewing of the farm in June 2007, Mr Wakley and his father, along with a friend, were shown around Staple Park Farm, situated in Staple Fitzpaine, near Taunton by a representative of The Crown Estate.

On viewing the Farm and in subsequently taking the decision to submit a tender at the rent he offered, Mr Wakley relied upon assurances given to him that the milking parlour (which had been mothballed during the void period) was 'right up to date', the slurry/dirty water storage and disposal system was 'right up to date', that the farm had a plentiful and reliable freshwater supply and effective distribution system, and that the silage to be purchased as part of the incoming valuation was 'very good'.

Mr and Mrs Wakley moved to the farm at Michaelmas in 2007 along with their herd of Holstein Friesians and their three children. Their occupation at this stage could be characterised as either an agreement for lease or a tenancy at will pending finalisation of the terms of the tenancy.

On attempting to start milking, Mr Wakley realised that the re-installed milking parlour was not in as good a condition as had been expected, and in particular the cow ID systems did not work properly, putting an increased burden of time and labour into the daily milking.

Over the following four years, it also became clear that the natural freshwater supply was not reliable and of questionable quality, and that there were numerous leakage issues with the mains supply. Mr and Mrs Wakley were faced with problems of cattle queuing at water troughs and regular time consuming efforts to unblock pipework.

The farm was also prone to flooding in heavy rain, and being situated in a bowl, much of the surface water runoff from the surrounding fields ran onto the farm yard and into the slurry lagoon, dramatically increasing the amount of slurry.

The silage turned out to be of poor quality and contaminated with wire, the quality issues made it difficult and expensive to balance a TMR and the wire obviously caused the usual problems with lesions to digestive tracts, dramatically increasing mortality.

Completion of the written tenancy agreement

An unusual feature of this case is that Mr and Mrs Wakley experienced many of these problems before the tenancy was signed at Christmas 2008, and indeed their agent negotiated express terms requiring the landlord to remedy many of the issues, which they had encountered in the first year.

Mr and Mrs Wakley were not happy with the terms of the tenancy they were presented with, and felt that they had been inadequately compensated for their losses. They found themselves in a position where they had to either sign the deal, which was on the table, or leave. The Judge took this into account.

Misrepresentation claim

Mr and Mrs Wakley's claim was advanced on a number of bases, but the one which was ultimately the most successful for them was in misrepresentation. The cause of action, as applied here, can be shortly stated as a 'representation' (which turns out to be false) that induced the representee to enter into a contract.

It is important to note that the 'representation' does not need to be made with the knowledge that it is untrue. There is a raft of different sorts of misrepresentation, from completely innocent to outright fraudulent, leading to a range of different results, from the contract becoming null and void, to damages on a very generous basis.

In this instance the type of misrepresentation relied upon was the relatively vanilla 'negligent' variety, although here it might better be characterised as 'careless', or 'reckless', given the nature of the claim.

In this case the representative of the landlord was, in the main, passing on information which they had been given by others, rather than giving their own views or advice. The Judge's view was that, objectively considered, there were no reasonable grounds for the representative to believe that the representations they passed on were true, because they had not made reasonable enquiries that they were true.

There is some comfort to agents in section 2(1) of the Misrepresentation Act 1967 which provides that once the representee (i.e. the person given the statement) proves that the statement was in fact false, the representor (i.e. the person making the statement) can seek to demonstrate that he had reasonable ground to believe and did believe up to the time the contract was made, that the facts represented were true.

Measure of damages

The measure of damages for this variety of misrepresentation is that the representor is liable for all of the actual damages directly flowing from the misrepresentation, even if they were not foreseeable at the time of the misrepresentation. This may be more generous than the measure for pure breaches of contract. Perhaps surprisingly this is the same measure of damages as are provided for fraudulent misrepresentation, although no fraud may be involved (and certainly was not involved in this case).

As a result of the findings on misrepresentation, the Court found that the Crown Estate was liable in the amount of £1.75 million in damages to the Wakleys, consisting of partly direct losses, and partly losses of profit based on a model budget.

Evidence of misrepresentations

An unfortunate feature of this case from the landlord's point of view was that its representative was being asked to recall events which happened around nine years ago, when they had no doubt shown 10-20 people around the farm in a short period of time. For the representative, the successful bidders were two out of many prospective tenants, whereas the first viewing was obviously much more vivid to the Wakleys and their recollections accordingly more lucid. Perhaps it also did not help that arguably the particulars did not make clear the limitations of the infrastructure on the holding. Unfortunately there were no notes of the viewings available.

On the representations, the Judge also pointed out that in his view, if the response to a query over some item of landlord's equipment had been: "I am afraid I cannot give you any further information, it's a case of caveat emptor", that would have meant no misrepresentation took place.

So in this case why did the Judge still find misrepresentation to apply, even though at the time of actually entering into the tenancy (at Christmas 2008) the Wakleys knew many of the difficulties, which they would experience in farming there? It may come as a surprise to some that the case authorities do permit this; in applying the law, the Judge pointed out that in his view, at the time of signing, the Wakleys had no choice but to do so, having already reached the point of no return.

Conclusion

Clearly it is important to start with accurate (warts and all) particulars when letting or selling a farm; these will set the tone for the viewings which follow. Given that the person tasked with showing prospective tenants and purchasers around farms is often a trainee or newly qualified agent, it may well be worth rehearsing beforehand the sorts of questions asked, and the appropriate responses. The case also highlights the perennial and evergreen value of good attendance notes, which will always be illuminative, where events of some history are approached by the court.