In May 2004, Lambson Fine Chemicals Ltd sold a 40-acre industrial property to Merlion Capital Housing Ltd for £12.25m. The property had been used for the manufacture of chemicals since the 1860s. By the late 1940s it was owned by Laporte and used for the manufacture of suphuric acid, sodium sulphate and salt cake.

Lambson bought the property in 1975 and used it for chemical manufacturing processes. Lambson and occupied the property until its sale to Merlion. Merlion planned to substantially redevelop the property, possibly for residential purposes: it is bounded by two rivers and is close to the centre of Castleford. On the date of the sale agreement Savills provided a valuation report to Lambson which indicated that it was worth £135m.

Shortly before the property was sold, ground investigation specialists carried out a number of borehole tests which found that the soil at the property was contaminated with waste product from gasworks known as “Blue Billy”. Blue Billy is particularly dangerous as it contains high concentrations of cyanide. The sale went ahead notwithstanding, however Lambson agreed to a retention sum being held back pending removal of the Blue Billy from the soil. The bulk of the retention sum was eventually paid, but £150,506 remained outstanding. Lambson brought a claim for the balance of the purchase price. Merlion counterclaimed the sum of £425,597 for excavating and removing the soil impacted by the Blue Billy.

Merlion’s case was that it entered into the sale agreement with Lambson in reliance upon a written representation made shortly before the sale by Lambson’s director, Mr Hall, as to the extent of the contamination of the property; namely that he knew of no contamination other than that specifically identified in the environmental survey report and that the parties had agreed that borehole tests indicated a level of contamination for the property as a whole and should not therefore be interpreted as meaning that there was only contamination at the site of the boreholes. Merlion maintained that this representation was made fraudulently and that following the purchase, it discovered that over 14,000 tonnes of soil had been contaminated by Blue Billy.

The main issue which arose at trial was whether the statements contained in the letter from Mr Hall before the sale was completed constituted an actionable misrepresentation.