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Does this property contract clause protect a vendor from misrepresentations? 

Case briefing: Mackie v Scott

Jersey property contracts have always included a provision known as a tout tel clause.* This was thought to place the onus on purchasers to check that the property they were purchasing was free from hidden or apparent defects before passing contract. Its standard inclusion in property contracts means it has been a long time since the Jersey court has had to consider how far this clause can protect a vendor when selling their Jersey property.

Liability for hidden defects

In 1983, the Court of Appeal was reluctant to determine exactly how far the clause excluded liability for hidden defects. However it indicated a preliminary view that not all hidden defects may be covered by the clause.  As a result of that judgment, the wording of the tout tel clause was slightly changed. Modern property contracts include the wording “the property was sold with all such other rights, appurtenances and dependencies ….in the state in which it was at the date of sale with all its apparent or hidden defects (vices caches)…”.   Property practitioners generally felt that this form of the tout tel clause was all encompassing and, unless a vendor deliberately lied in relation to a defect, all hidden defects were unprotected and the purchaser had no recourse against the vendor should they only become apparent after the sale.

This ambiguity may finally be resolved if the case of Mackie v Scott [2017]JRC 179 reaches trial before the Royal Court. Ms Mackie wants the court to decide that the tout tel clause cannot offer any protection for a vendor who makes a misrepresentation (whether innocently or not) which later causes loss to the purchaser. She argues that Ms Scott’s false representations of fact to her in relation to a property which Ms Scott had developed and then sold to Ms Mackie caused her significant loss and, as a result, she is entitled to claim damages.

Preliminary hearings

In most cases, there will be matters of law and matters of fact which the court need to decide. Issues of law are decided by the Judge, whereas the issues of fact are decided by the Jurats. The Judge has a casting vote if the two Jurats cannot agree. If there is a disagreement as to the correct law to be applied by the court, it is possible to have a preliminary hearing to determine the legal issues. This avoids the need for evidence to be heard by the witness of fact. Preliminary hearings are therefore utilised by the court when there is a possibility the decision will avoid a more lengthy and costly trial.

In Ms Mackie’s case, there is disagreement as to whether Ms Scott actually gave representations before the sale. Whether she did or not, is an issue of fact which must be decided at a full trial before two Jurats. However, the applicability of the tout tel clause is a matter of law and is capable of being decided before the trial without the court hearing evidence from any party.

On the application of Ms Scott, the Master ordered a preliminary hearing regarding the scope and effect of the tout tel clause. In his reasoned judgment he indicated that having a preliminary hearing may avoid the need for a costly court hearing. This would suggest that if the court decides the clause is all encompassing and will protect vendors who make misrepresentations to purchasers, then Ms Mackie’s claim may fall away completely.

Vendor liability

The fundamental question will be whether the vendor can be held liable for all representations that he makes about his property, whether they are innocent misrepresentations or not. No matter what decision the Royal Court initially makes, Jersey property lawyers will be eagerly waiting to see if the decision is appealed by the losing party in the hope that Jersey will (at long last) have a Court of Appeal decision which determines the limitations of this clause.

*Tout tel is more commonly referred to as the vice caché clause.