Mr Cleaver had agreed to sell a property to Schyde for residential development. His solicitors replied to standard enquiries raised by Schyde confirming that no planning applications had been made in respect of the property. Subsequently, Mr Cleaver received notice that a third party had applied for permission to build a health centre on the property, but his solicitors failed to inform Schyde of this. Contracts were exchanged incorporating the Standard Conditions of Sale (4th edition).
Prior to completion, Schyde discovered the planning application. It considered that, if successful, the application would considerably hamper its prospects of obtaining planning consent for pure residential development. Schyde therefore sought to rescind the sale contract on the basis of misrepresentation by Mr Cleaver. Mr Cleaver relied on Standard Condition 7.1.3 which excluded the ability to rescind for misrepresentation except in cases of fraud or recklessness or where the property differed substantially in quality, quantity or tenure from that which the purchaser expects to receive. Schyde argued that Condition 7.1.3 was not fair and reasonable and was accordingly of no effect by reason of section 3 of the Misrepresentation Act 1967.
The judge agreed with Schyde holding that the clause was ineffective and Schyde was entitled to rescind. Cleaver appealed, arguing that the judge had failed to give proper weight to the facts of the case, including the fact that both parties were of equal bargaining power and legally represented. Moreover, the Standard Conditions (which the parties had negotiated in other respects) had a long history and were approved by the Law Society.
The Court of Appeal refused to overturn the judge’s decision. There was nothing self-evidently offensive about Standard Condition 7.1.3 and the factors in this case created a strong argument for upholding it. However, the Court of Appeal should not disturb the judge’s findings unless they were obviously wrong. In this case, it was clear that the planning position was of particular importance to Schyde and the judge was entitled to regard this case as being a special one which justified the finding that Standard Condition 7.1.3 was of no effect.