HL Deb 18 June 1991 vol 530 cc128-33

6.56 p.m.

Report received.

Clause 1 [Offence of property misdescription]:

Lord Coleraine moved Amendment No. 1: Page 1, line 18, leave out from ("unenforceable") to ("by") in line 19.

The noble Lord said, My Lords, in moving Amendment No. 1, I speak with the leave of the House to Amendment No. 2, to which Amendment No. 1 is a paving amendment, and to Amendment No. 3, which is consequential.

The amendments provide that the commission of an offence of property misdescription under the Bill will also give rise to civil liability for which the person or any person suffering a loss as a result of the offence may sue for damages. It would generally involve a relatively simple and inexpensive application in a small claims court. It would also avoid the need for criminal proceedings in circumstances where criminal proceedings may not be appropriate.

The amendments were moved in Committee. However, I bring them back today because reading the Official Report makes it clear that the record is not altogether correct and complete as to the rights and remedies of a person suffering loss as a result of a property misdescription. I also consider that these matters deserve further consideration and response today before the Bill passes into law.

I am aware that it is a Private Member's Bill. I do not propose to press the matter further. The answer given by my noble friend Lord Astor in Committee, and echoed by my noble friend Lady Carnegy, was that the statutory duty for which I ask is not necessary because two remedies already exist and there is no need to add a third. My noble friend Lord Astor stated that, in the event of the conviction for an offence of misdescribing property, the aggrieved party would be able to apply to the court for a compensation order under the Powers of Criminal Courts Act 1973. The consumer who is adversely affected by misdescription also has recourse to compensation by way of a civil action to misrepresentation.

In reply to the debate I suggested that, except where a contract for a purchase of land ultimately follows the property misdescription, the only right of an aggrieved person to sue for damages would be where he could prove that the misrepresentation was made either fraudulently or recklessly. There is no general right to found a claim on misrepresentation. However, it has since been suggested to me that an action for negligent misrepresentation might effectively provide a full civil remedy. I think that that is unlikely. The action for negligent misrepresentation is a development of the common law over the past 20 years. It began with a decision of the House of Lords in 1964 in the case of Hedley Byrne & Company Limited v. Heller and Partners. In that case a company's bankers carelessly gave an incorrect financial reference for the company to a third party with whom those bankers had no financial or other relationship. The bankers were held to be potentially liable to that company, to whom they were found to owe a duty of care.

The question which would have to be answered before an estate agent was held liable for negligent misrepresentation is whether the estate agent owed the applicant a duty of care at common law. In my opinion it is unlikely that this question would be answered affirmatively. The matter is put in the following way on page 448 of the practitioner's main reference work on tort, Clerk & Lindsell: On the question when such a duty of care would be owed, the House of Lords said that this would be so whenever there was a special relationship between the plaintiff and the defendant, in particular whenever the party seeking information or advice was trusting the other to exercise such a duty of care as the circumstances required, where it was reasonable for him to do that and where the other gave information or advice when he knew or ought to have known that the inquirer was relying on him". The reference to the House of Lords was in the case of Hedley Byrne.

I very much doubt whether an estate agent would be found to owe that duty of care to an applicant for property. It is correct that people looking for property do rely on what they read in the estate agent's particulars and on what they are told by estate agents. That would not bring estate agents within the rules. Applicants know that the given measurements of rooms and descriptions of drainages are likely to be correct, but they also know that there is the possibility, to say the least, that they are the result of wild exercises of imagination on the part of estate agents and that they should be verified if they are of material importance.

They know that the estate agent is acting for the seller of the property and owes his entire duty to his client. They do not see themselves as recipients of information given to them by a person acting under a duty of care. For there to exist a duty of care to every applicant would impose a quite unacceptable and unrealistic burden on the estate agent in relation to his own client. I should mention that I am of course speaking of the common law and not of this Bill.

If I am right—and the Consumers' Association have informed me that they are unaware of a reported case for a successful action against an estate agent for negligent misstatement—then the aggrieved applicant is left with the possibility that the weights and measures authority may successfully bring a prosecution against the estate agent and that the courts may award compensation under Section 35 of the Powers of Criminal Courts Act 1973. We discussed this briefly in Committee and I shall not dwell on it, if only because it is a useful remedy in the right circumstances but can never be a remedy of general application.

It is true, I understand, that an aggrieved applicant may bring a private prosecution, although not in Scotland. His rights must otherwise depend on the decision of a weights and measures authority to prosecute. In coming to a decision whether or not to prosecute, it is very unlikely that the authority will attach much weight to the possibility that a compensation order may be made. So we are left with the likelihood that many, but not all, of these applicants will be without compensation as a consequence of property misdescription, depending on whether or not there is a successful prosecution under the Act.

This seems an unfortunate omission in a consumer protection measure. The Bill creates what ought to be a new civil wrong affecting individuals. It is the response of the collectivist to legislate for penalties and offences, as in this Bill, and to withhold from the consumer the right to go to court to look after himself. I consider that the Bill should have had a clause creating a statutory duty, or, if that was inappropriate, should have disapplied the provisions of the Powers of Criminal Courts Act 1973. I beg to move.

Lord Monson

My Lords, far too many new criminal offences have been created during the past 12 years: the tally must be approaching 1,000 by now. Also there is far too much recourse to the criminal law nowadays, even when perfectly adequate civil remedies are available which, as the noble Lord, Lord Coleraine, has indicated, benefit the consumer rather than the state in the abstract. Both these tendencies are undesirable in principle for obvious reasons, and are often counter-productive in practice. One only has to look at what a damp squib insider trading has turned out to be recently. For these reasons I warmly support the three amendments of the noble Lord, Lord Coleraine.

Viscount Astor

My Lords, perhaps it would be convenient if, before the noble Baroness, Lady Carnegy, answers, I put the Government's view. My noble friend Lord Coleraine moved an amendment in Committee which is identical to Amendment No. 1 which is before you now. That amendment was negatived and I am a little surprised that the noble Lord has come back to your Lordships' House with the same amendment, although I understand my noble friend is seeking to protect the position of people who may suffer loss as a result of property misdescription. However, I submit, as I did at the Committee stage, that the noble Lord's amendments are unnecessary. Clause 1(4) does not deprive aggrieved parties of any of their rights of action for compensation under existing law. It merely means that the commission of an offence under the Bill does not in itself result in any further civil rights. It may help your Lordships if I go into a little more detail on this than I did in Committee. In doing so I hope to be able to persuade my noble friend that there is no need to pursue this matter any further.

Perhaps I should preface my remarks by saying that I am not a lawyer and I have no wish to cross swords with my noble friend over matters of legal interpretation or practice. However, I am speaking on behalf of the Government and, as I have said at earlier stages, the Government have provided the drafting services for this Bill from the beginning.

The purpose of Clause 1(4) is to make clear that the Bill does not create a new civil remedy. The reason for the clause is that the Bill is intended to put the misdescription of property broadly on all fours with the misdescription of goods under the Trade Descriptions Act 1968. The criminalisation, and thereby the deterrence, of property misdescription is the sole object of the Bill and, in not providing specific civil remedies for aggrieved persons, it follows most other statutes in the field of what might be broadly called consumer protection law. I know the noble Lord is an expert on the law of tort and contract but he may be less familiar with some of the various statutes which have been passed to protect consumers by means of enforcement by third parties. There is a body of law which has developed over many years, and most of the relevant statutes create criminal offences. These statutes relate to specific trading matters and are enforced by local authorities or other agencies. In such statutes it is not uncommon for an action for a breach of statutory duty to be expressly excluded.

As we discussed in Committee, there are other remedies available for consumers who suffer loss as a result of property misdescription and perhaps I may briefly summarise them again.

In Committee my noble friend Lord Coleraine referred to two possible remedies; namely, an action for fraudulent misrepresentation or for innocent misrepresentation. I am advised that what he said is perfectly correct as far as it goes but he may not have considered some aspects of the matter. Where a contract has been concluded, the party to the contract would. in the case of fraudulent misrepresentation, have the remedy at common law of damages relating to the contract. If the misrepresentation had become a term of the contract, a remedy for breach of contract would also be available. In the case of innocent misrepresentation by virtue of the Misrepresentation Act 1967, a party to the contract would have the remedy of recision of the contract or damages in lieu of recision. Again, if the misrepresentation had become a term of the contract, there would also be a remedy for breach of contract.

Those possibilities are fairly clear but, as my noble friend pointed out, they do not help the person who does not conclude a contract but who nevertheless suffers a loss as a result of the misdescription. However, there are two possibilities in such a case. First, as my noble friend acknowledged in Committee, there is a remedy for fraudulent misrepresentation. In that case, there may also be a criminal offence under existing law.

The second possibility is an action for negligent mis-statement. I am advised that in the circumstances in which an offence under Clause 1 of the Bill is likely to be committed, it is also likely on the same facts that a civil action could be brought for negligent mis-statement if not for fraudulent misrepresentation.

Therefore, it seems to me that remedies are available for people affected by property misdescriptions and that to add another specific remedy under this Bill is not in practice likely to make much of an improvement to the consumer's position. My noble friend's point has logical merit, but I submit that the Bill as drafted is well precedented and does not need amendment.

Baroness Carnegy of Lour

My Lords, I admire enormously the determination and energy with which my noble friend Lord Coleraine has pursued his anxieties on this Bill and the courtesy with which he has kept me in close touch with his thinking. The Minister responded to most of the legal points made. I am grateful to him. I shall confine myself briefly to a general comment on one point only.

In bringing back these three amendments for the second time, my noble friend Lord Coleraine explained that, since Committee stage, it has been pointed out to him that certain consumers, whom he felt may have inadequate means of redress under the Bill, may well be able to take civil action for negligent misrepresentation. My noble friend explained in some detail why he has doubts about whether that could be done and why, therefore, he has retabled his amendments. My noble friend on the Front Bench responded to that.

I have listened carefully to what my noble friend Lord Coleraine said. Even if there were a case for the law regarding negligent mis-statement to be strengthened, it seems to me that there is no case for a piecemeal approach dealing with only this mis-statement in one particular commercial context and not with others. I know that that is the view of the consumers' associations and it clearly makes sense.

In any case, this Bill is not intended and never was intended to provide an all-embracing solution to all consumer problems associated with the description of property. Had that been the intention, the Bill might have made provision for those matters which should have been included in property descriptions as a minimum rather than merely banning misdescriptions.

The Bill is modest with limited aims. As I said on Second Reading, it seeks only to ensure that those in the business of marketing property are subject to the same sort of regime as those in the business of selling goods. In so doing, it follows a number of other statutes which form the cornerstone of consumer protection in this country.

I have had a number of conversations with my noble friend and discussed with him his anxieties, and I have sought advice. I am not persuaded that the absence of a specific civil remedy in this Bill is a deficiency. The purpose of the Bill is to make property misdescription a criminal offence and to arrange for enforcement to be carried out by trading standards officers who are experienced in administering statutes of this type.

I take the point made by the noble Lord, Lord Monson, in his welcome intervention in our discussions on the Bill but I believe the House is concerned not to make criminal offences when there is no need to do so. If he has studied the previous stages, he will know that the Bill in this form is greatly welcomed by professional bodies, trade organisations and many others who have been consulted. It has not been a source of disagreement.

I am convinced that this arrangement will represent a great advance in consumer protection in this area. I hope that my noble friend will accept that expanding the scope of the Bill in the way in which his amendments would do is not appropriate. If my noble friend's arguments have validity, I suggest that they would be for another Bill at another time. Therefore, I hope that he will not press his amendments.

7.15 p.m.

Lord Coleraine

My Lords, I am grateful to all noble Lords who have spoken. It has clarified a situation which remained rather uncertain in Committee. My anxieties about the possibility of estate agents committing the tort of negligent misrepresentation or mis-statement remain unabated. However, whether or not the Minister and my noble friend are lawyers, I should not consider it appropriate to continue that discussion at present.

I congratulate both my noble friends on the fact that, although not lawyers, they have pursued in relation to the Trade Descriptions Act and other Acts of the same nature the doctrine of precedent. I am not certain that those precedents should always be applied. I believe that certain precedents do not necessarily apply to this Bill in relation to this amendment. However, it is not my intention to pursue the matter further and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 2 and 3 not moved.]