The case involved a development site, with it being agreed that the seller would get an additional amount when planning permission was obtained. Since this might be some years later, a formula took the existing base value of the land (£212 per sq ft), and said the seller was entitled to an extra percentage based on the increase at the time planning permission was granted. As such, it was a relatively straightforward transaction. But, the problem was that the negotiations between the seller’s agent and the buyer’s agent were flawed. In essence, the seller’s agent agreed to the £212 per sq ft value in the light of statements made by the buyer’s agent (who had deliberately inflated his price for negotiation purposes). During discovery, it was disclosed that the buyer’s internal documents showed that the buyer considered the value of the land to be only £177 per sq ft, but the buyer’s agent had told the seller’s agent that comparables warranted a price of £210 per sq ft, plus a small uplift to reflect the better location of the site. The end result of having inserted this higher figure was that the seller eventually discovered that he was not entitled to any additional payment when the planning permission was finally granted.

But, what remedy was available to the seller? One might initially think in terms of rectification, but that would not be possible because there was no mistake as to the actual terms of the formula (ie £212 was the correct agreed figure and had been intended by the parties). The only remedy would therefore lie in deceit, based on the argument that the buyer’s agent had gone too far in the negotiations by putting forward figures that he knew were too high. The court took the view that parties are clearly allowed some latitude in relation to furthering their own interests when negotiating a price but, this does not mean that the buyer can put forward a figure that it does not honestly believe in. If a figure is so wide of the mark, then the court will infer that it has been put forward dishonestly. On the facts, the court found that the true value at the time was £183 per sq ft, and that seller had been wrongly induced to agree the figure of £212. As a result, damages of £710,000 were awarded.

Clearly, cases of this sort depend very much on their own facts and it would be wrong to exaggerate the significance of this unusual decision. But, it does neatly illustrate the point that it is possible to over-negotiate; if you deliberately pull the wool over the eyes of the other side, and put forward submissions that you know are untrue, then you do run the risk of being liable in damages for deceit. Normally, it will be difficult for the other side to get the neccesary proof (and evidence of intention) but, as this recent case shows, it can sometimes be done. Connolly v Bellway [2007] EWHC 895 (Ch), noted in [2007] Property Week 18 May. © Practical Lawyer