Let the buyer beware! To what extent can reliance be placed on brochures prepared by estate agents?

In the recent case of Walsh v. Jones Lang Lasalle Limited [2017] IESC 38, the question before the Supreme Court was as follows:-

In what circumstances and to what extent a disclaimer of responsibility absolves a defendant supplier of information from liability for economic loss incurred by a plaintiff recipient of the information due to what would otherwise be negligent misstatement on the part of the defendant

To understand the question to be answered, we must first explore the facts giving rise to it.

The facts
Jones Lang Lasalle Limited (the “Defendant”) were engaged to act as estate agent on behalf of Tucks Limited (the “Vendor”) relating to the sale of a commercial property in Upper Gardiner Street in 2000. Mr Walsh (The “Plaintiff”) having been made aware the premises was for sale, viewed it on two occasions. On the second viewing, a representative of the Defendant furnished the Plaintiff with a sales brochure. The sales brochure outlined the square footage of the premises and contained the following disclaimer on the first page:-

Whilst every case has been taken in the preparation of these particulars, and they are believed to be correct, they are not warranted and intending purchasers/lessees should satisfy themselves as to the correctness of the information given

The Plaintiff submitted a handwritten tender for the property. Before doing so, he commissioned a “condition survey” on foot of which he received a verbal report as to the condition of the premises from a Mr O’Brien. Mr Walsh in giving evidence as to the methodology behind his tender, explains that he calculated the basis for the tender having made his calculations on the “back of an envelope”, in the metaphorical sense, by reference to the advertised square footage in the Defendant’s brochure. It is that square footage which is at the heart of the dispute in this case. The square footage of the property was advertised as 23,057 square foot. However, it subsequently transpired that this was overstated by 1,809 square foot and the Plaintiff claimed that he acted in reliance on the figures as advertised and submitted his tender to purchase the property effectively at an overvalue. The Plaintiff issued plenary proceedings in the High Court claiming damages for negligence and negligent misstatement by the Defendant and was awarded damages in the sum of €350,000 by way of compensation.

Supreme Court Judgment
Overturning the decision of the High Court by a majority (3:2), three written judgments were handed down; Judge O’Donnell and Judge Laffoy in the majority and Judge MacMenamin dissenting.

Judge Laffoy in her judgment identified the key questions:-

1. Whether a duty of care is owned by the estate agent giving the information to the recipient of it;
2. Whether the existence of the disclaimer by reference to its terms has the effect that there is no assumption of responsibility for the task of furnishing correct information on the part of the estate agent giving the information to the recipient;
3. Whether, in furnishing the brochure to Mr. Walsh, having regard to the existence of the disclaimer on the first page of the brochure, JLL can be found to have assumed responsibility to Mr. Walsh for the accuracy of the information, including the floor area measurements, contained in the brochure.

Judge Laffoy concluded that the questions must be determined objectively and that means having regard to what a reasonable person in the position of the Plaintiff would have understood at the time in circumstances where such a reasonable person is on notice of the disclaimer. Furthermore, in order to read the disclaimer objectively, it must be read as a whole. She therefore formed the view, having regard to the disclaimer made by the Defendants, that it was “clear and unambiguous as to non-assumption by JLL of responsibility for the corrective of the particulars”. Furthermore, Judge Laffoy noted that the Plaintiff could have instructed that a measurement of the internal areas was carried out when the survey of condition was taking place. Indeed, Mr O’Brien gave evidence that if he had been asked to measure the property on the day he was carrying out the survey as to condition he could have done so and subsequently he did do so in March 2001.

References in the disclaimer to “every care having been taken” and “particulars being believed to be correct”, Judge Laffoy found could not be read in isolation and could not be taken as a representation that there is “no misstatement or incorrect information”. Contrary to the suggestion of the trial judge in the High Court there is no onus on the Defendant to draw a prospective purchaser’s attention to the fact that any measurements should not be relied upon.

As to whether the Defendant could be found to anticipate that the Plaintiff would rely on the information, Judge Laffoy concluded that the Defendant could not be expected to anticipate this because the disclaimer clearly states that the information furnished is not guaranteed and thereafter places the onus on potential purchasers/lessees to satisfy themselves as to the accuracy of any information given. Therefore, it was determined that there was no special relationship giving rise to a duty of care between the Plaintiff and the Defendant.

A common thread throughout the written judgments of Judge Laffoy and Judge O’Donnell relates to reinforcing the distinction between a finding of liability for a negligent act compared to a finding of liability for a negligent misstatement. Judge O’Donnell was of the view that it was wrong to take a unified approach. Reaffirming the decision in Hedley Byrne v. Heller [1964] A.C. 465 which distinguishes between negligence acts and negligent misstatements and citing a passage from the judgment of Lord Reid, Judge O’Donnell, emphasised the importance of establishing an undertaking of responsibility in cases of negligent misstatement where the degree of proximity between statements and acts is in most cases poles apart.

On a parting note, Judge O’Donnell in his concluding remarks offered some guidance to prospective purchasers:-

It is reasonable in my view, that if a purchaser has a particular interest in reliance n on the information in the brochure, the starting point should be that he should contract for that, either with the vendor, the vendor’s agent, or his own expert, and otherwise bear the risk of reliance in error, unless the agent has, and for whatever reason, clearly assumed the risk.

Conclusion
The old principle of Caveat Emptor still applies. All prospective purchasers should ensure that they carry out the necessary due diligence prior to acquiring any new property. Following the decision of the Supreme Court in this case, the onus is placed firmly on a purchaser to carry out all necessary inspections, surveys and reports prior to the purchase.

From an estate agent’s perspective and so as to protect your business, all brochures and promotional material should contain clear and unambiguous disclaimers as to the contents and representations contained therein. Such disclaimers should not be open to interpretation and should be clearly and obviously placed on the face of all promotional material.

For further information contact Elaine McGrath emcgrath@reddycharlton.ie