Key points

  • There is a presumption that where a hedge and a ditch separate two parcels of land, the boundary of the land will run along the outside edge of the ditch (so that both the hedge and ditch are included in the same title)
  • However, this presumption will not apply where the hedge was created prior to the division of the land into separate ownership
  • A seller who gives an incorrect reply to enquiries raised on behalf of the buyer may be liable in misrepresentation
  • The buyer may be entitled to unwind the transaction after completion in these circumstances

Background

When land is bought and sold, it is normal for the seller to provide the buyer with replies to standard pre-contract enquiries. These will cover issues such as whether any third parties have any rights over the property, what outgoings are payable in respect of the property and where the boundaries are.

These enquiries must be answered honestly and accurately. If they are not, then the buyer may have a cause of action against the seller for misrepresentation. This may mean that the seller has to pay damages to the buyer, but in some circumstances the buyer may be entitled to walk away from the transaction. In an extreme case, the buyer may even be entitled to "unwind" the transaction after completion - as Harsten Developments Ltd v Bleaken illustrates.

Facts of Harsten Developments Ltd v Bleaken

The property being sold in this case was part of the garden of an existing house, which had planning permission for development. The property was sold at auction to the claimant developer. After completion, the developer began to clear the site. The next door neighbours objected to the removal of a hedge which lay between the building plot and their property. The neighbours argued that the hedge was on their side of the boundary and did not belong to the developer.

Two sets of proceedings were commenced: one between the developer and the neighbours to determine the position of the boundary, and one between the developer and the vendor of the building plot, for rescission of the contract for the sale of the site. This was because the land on which the hedge stood was crucial to the development of the site in accordance with the planning permission.

The position of the boundary

The judge found that the boundary was created by a conveyance from 1926, which referred to the land sold by reference to a number on an Ordnance Survey (OS) map. The judge ruled that the physical feature which marked the boundary of the land on the OS map was the disputed hedge.

The evidence showed that there had once been a ditch beside the hedge, on the side of the building plot. The neighbours relied on the "hedge and ditch" presumption to argue that, not only the hedge, but also a strip of land the other side of it, belonged to them.

The "hedge and ditch" presumption is that if a person owns land up to a legal boundary and wishes to create a ditch and plant a hedge, he/she will dig the ditch along the boundary, staying on his/her side of the boundary, and throw the soil back onto his/her own land. This would create a bank on which the hedge would then be planted. Where the presumption applies, the area taken up by the ditch and the hedge therefore belongs to the person who owns the land on the other side of the hedge.

The court ruled that there was no room for the hedge and ditch presumption to apply where the hedge in question had been created prior to the division of the land into separate ownership. In this case, the evidence was that the hedge had been in situ in some form since before 1926.

In any event, where an OS map shows a hedge as the boundary feature, the line on the map is the middle line of the hedge. Since the 1926 conveyance described the land by reference to the OS map, the judge held that the legal boundary between the building plot and the neighbours lay along the centre of the hedge. The developer had therefore not been entitled to remove the whole hedge.

Misrepresentations

The developer argued that it had been induced into entering into the contract to purchase the building plot as a result of misrepresentations made by the seller. The main misrepresentations alleged were that:

  • the seller had failed to disclose the existence of a drainage pipe which ran through the covered ditch, and which served a neighbouring property. The existence of the pipe impeded development; and
  • the seller had represented that the land transferred included the whole of the hedge.

The auction particulars stated that:

"The plot is marked on site... The ... hedge to the ... east will be owned by the plot and it is assumed that [this] will be removed to provide the ... dimensions [quoted earlier in the catalogue for the plot]".

The particulars provided that the property was sold subject to all rights including drainage. They went on to say:

"Both plan and particulars are believed to be correct but they do not constitute any part of any offer or contract and any intending purchaser must satisfy himself by inspection or otherwise as to the correctness of each of the statements contained in these particulars as all such statements are made without responsibility on the part of [the auctioneer] or the vendor or his solicitor".

Replies to standard pre-contract enquiries were provided in the auction pack. The existence of the drainage pipe was not disclosed in answer to a question about drains, pipes and wires crossing the property.

The judge held that the fact that the auction particulars stated that the property was sold subject to all rights (including drainage) did not prevent the answers given in the replies to enquiries being representations. Indeed, if it was the case that the sale contract provided for the sale to be subject to drainage rights, whether or not referred to in the contract, the replies to enquiries became even more important to a potential buyer.

The judge also held that the auction catalogue contained a clear representation that the seller had title to the whole of the hedge and that this would be acquired by the buyer.

The judge ruled that the disclaimers in the auction particulars did not prevent the seller being liable in misrepresentation. Although the particulars stated that a buyer should inspect the plot, an inspection would not have revealed that the representation was wrong. Curiously, the seller did not seek to rely on the statement in the particulars that they were "made without responsibility on the part of ... the vendor" and so this particular part of the disclaimer was not tested.

The remedy of rescission

The sale contract incorporated the Standard Conditions of Sale, 4th edn. Standard Condition 7 sets out the remedies to which a buyer is entitled where the plan or any statement in a contract, or in the negotiations leading up to it, is misleading or inaccurate due to an error or omission.

Such an error or omission will only entitle the buyer to rescind (terminate) the contract where:

  • it results from fraud or recklessness; or
  • the buyer would be obliged, to its prejudice, to accept property differing substantially (in quantity, quality or tenure) from that which the error or omission led it to expect.

The judge ruled that the misrepresentations about the location of the boundary and the drainage easement met the second of these criteria. The building plot was always "tight" for the erection of even a modest house. The additional constraints caused by the true position of the boundary and the drainage pipe meant that the property was substantially different from what the buyer had been led to expect.

The judge held that the fact that the sale contract had been completed was not a bar to the developer obtaining rescission, unless the developer had affirmed the sale contract.

Had the developer affirmed the sale contract?

The seller argued that the developer had affirmed the sale contract by re-applying for planning permission in relation to the site, and that this had barred any right to rescission it would otherwise have had.

The judge ruled that the seller had not proved that, when the developer applied for planning permission, it was aware that there had been misrepresentations which would entitle it to rescind.

Should the sale contract be rescinded?

The court has the power to order the payment of damages in lieu of rescission if it believes it would be equitable to do so. However, the court thought that the developer was entitled to rescission. It did briefly consider whether the length of time since the sale (which took place in 2007) militated against rescission but, since the seller had not argued that the lapse of time had had any adverse effect on them, it could not take this into account.

The effect of the court's order meant that the property would be re-transferred to the seller, who would have to repay the purchase price plus interest to the developer. In addition, the buyer was entitled to damages under section 2(1) of the Misrepresentation Act 1967. The court ruled that this could include sums to cover interest charges and other finance costs, as well as conveyancing expenses and any irrecoverable Stamp Duty Land Tax.

Things to consider

In order for a misrepresentation to be actionable, the buyer must have relied on it when entering into the sale contract. The judge in this case was in no doubt that the developer had relied on the misrepresentations. However, if there is no reliance, then there can be no claim in misrepresentation.

Replies to enquiries are frequently caveated with disclaimers. Whether such disclaimers are enforceable will depend on whether they are reasonable in the light of all the circumstances known to the parties at the time. This means that whether a particular "standard" disclaimer is effective may depend on the circumstances of each individual case.