Landlord and tenant – Commercial lease – Misrepresentation – Implied term – Appellant landlord appealing against judgment in favour of respondent tenant in respect of business losses resulting from allegedly unsafe electrical wiring – Whether lease including implied term making appellant responsible for electrical wiring – Whether respondent entitled to rescind on basis of misrepresentations – Appeal dismissed
The respondent rented from the appellant premises at the Glendon Lodge Farm Complex, Glendon, Kettering, Northamptonshire which she ran as a café. The parties entered into a written lease for a three-year term. The lease included a clause which provided that it was the “entire agreement and understanding of the parties relating to the transaction”, and a clause whereby the respondent acknowledged that in entering into the lease she was not relying on, and would have no remedy in respect of, any statement or representation made by the appellant.
The respondent experienced problems at the premises, as a result of allegedly unsafe electrical wiring which caused her to close the business. She sought to recover the losses incurred in the closure of her business. She alleged that the appellant had falsely or negligently represented to her that the premises had been rewired and had passed an inspection, and that she was therefore entitled to rescind the lease. Alternatively, she argued that there was an implied term in the lease to the effect that the appellant was responsible for maintaining and repairing electrical installations, of which the appellant was in repudiatory breach and she was entitled to accept that repudiation. The lease did not contain any express obligations in relation to the exterior of the premises or the plumbing and electrical installation and supply.
The county court held that the appellant was in repudiatory breach of an implied or collateral obligation as to the safety of the electrical installation at the premises. The appellant appealed.
Held: The appeal was dismissed.
(1) It. (1) The judge had relied on her findings as to the parties’ true intentions as the basis for concluding both that a term should be implied and that such implication should not be prevented by the entire agreement provisions. Although there was undoubtedly common sense and justice in that approach, the problems with it were that (a) although described in terms of the implication of a term, the judge’s introduction of a fresh provision based on the parties’ true understandings was more akin to a collateral warranty or contract; (b) the parol evidence rule was that evidence was ordinarily inadmissible to vary or contradict the terms of a written contract; (c) that rule was reinforced by the entire agreement provisions, which under English law would ordinarily be given full force and conclusive effect as an integral part of the parties’ bargain in accordance with its terms: Inntrepreneur Pub Co Ltd v East Crown Ltd [2000] 3 EGLR 31 considered.
(2) In the absence of a fraudulent misrepresentation, there was no basis for permitting reliance on a representation in the teeth of the non-reliance limb of the entire agreement provisions in the lease. Accordingly, if the judgment was to be sustained, it had to be on the basis of an implied term. In that respect, the judge had relied on Liverpool City Council v Irwin [1976] 1 EGLR 53. However, that case did not support the judge’s approach of treating the subjective common understanding of the parties as reason enough both to imply a term to give it effect and to neutralise the entire agreement provisions: Fulton Motors Ltd v Toyota (GB) Ltd [1998] Eu LR 327 considered.
(3) It was well-established that a term could be implied where it was necessary to give business efficacy to the contract in question. In such a context, the touchstone was always necessity and not merely reasonableness, and the term was implied as a matter of fact in the particular case, rather than as a matter of law and as a legal incident of contracts of an identified type. In that context, the appellant had conceded that an entire agreement provision did not affect or prevent the implication of a term to be implied on grounds of business efficacy. That concession was entirely correct: a contract lacking business efficacy had to be supplemented to cure the defect if possible. It could not be supposed that the parties would have intended an entire agreement clause to cause the agreement to fail, and to prevent the court from saving it, if there was an available and appropriate means of doing so consistently with, and to give effect to, what the court found must have been the true intentions of the parties.
(4) In the present case, there was a legitimate basis for implying a term making the appellant responsible for the installation and maintenance of the electrical wiring. It was obvious from the reservation to the appellant landlord of the right of access for the purpose of repairing, maintaining or renewing any service media as defined connoted at least an obligation on the part of the appellant as regards the safety of the service media it had installed at the premises. In such circumstances, to ensure that the lease did not lack commercial or practical coherence or, as a matter of business necessity, the obvious gap should be plugged by implying a covenant on the part of the appellant to the effect that the electrical installation and other service media provided was safely installed and continued to be covered by any requisite certificate (the right of entry being to enable it to make good the covenant). Against that background, a covenant by the appellant should be implied that the electrical installation which served the premises was safe and the subject of a current electrical safety certificate. Given that the appellant was in breach of the term to be implied, the judge’s decision granting the respondent judgment in the sum claimed was substantially correct: Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] EGLR 8 applied.
Anthony Katz (instructed by Lamb and Holmes LLP, of Corby) appeared for the appellant; Stephen Taylor (instructed by Tollers LLP, of Kettering) appeared for the respondent.
Eileen O’Grady, barrister
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