Contract – Misrepresentation – Exclusion clause – Lease of commercial premises – Asbestos – Damages – Appellant landlords granting lease of warehouse premises to respondent – Appellants’ claim for unpaid rent abandoned – Respondent awarded damages for losses suffered due to asbestos damage – Respondent denying prior knowledge of asbestos – Whether section 3(1) of Misrepresentation Act 1967 applying to “non-reliance clause” in lease – Whether “non-reliance clause” reasonable – Whether appellants’ liability limited to extent of trust assets – Appeal dismissed
The appellant landlords were trustee companies which granted a lease of bays in warehouse premises, at Dearne Mills, Darton, Barnsley to the respondent. By clause 5.8 of the lease, the respondent acknowledged that the “lease has not been entered into in reliance wholly or partly on any statement or representation made by or on behalf of the landlord”. The lease also provided that the appellants were contracting only in their capacity as trustees of a specified trust. Unknown to the respondent, but known to the appellants or their agents, the premises were so contaminated with asbestos that they were dangerous to enter. In their replies to pre-contract enquiries, the appellants misrepresented that they were unaware of any environmental problems relating to the property. Under the terms of the lease, completed on 30 April 2015, the respondent was obliged to carry out certain works and for that purpose it entered into possession on 6 May.
Asbestos was discovered on 14 May. Remedial works commenced in November 2015 and the premises were ready for occupation on 15 January 2016. The appellants’ claim for unpaid rent fell away when the rent was paid in full. All that remained was the respondent’s counterclaim for damages from 1 May 2015 to 15 January 2016, relating to the losses alleged to have been suffered as a result of the unavailability of the premises due to asbestos damage. The judge found that the respondent had entered into the lease on the basis of the appellants’ misrepresentation that there were no problems with asbestos. He concluded that clause 5.8 was an attempt to exclude liability but had no effect as it did not satisfy the test of reasonableness under section 11(1) of the Unfair Contract Terms Act 1977. He rejected the appellants’ argument that their liability was limited to the extent of the trust’s assets. Accordingly, the court gave judgment for £1.4 million plus interest: see [2017] EWHC 891 (Ch); [2017] EGLR 20. The appellants appealed.
Held: The appeal was dismissed.
(1) Absent clause 5.8, the appellants would have been liable for misrepresentation. On the face of it, clause 5.8 was a contract term which excluded liability for misrepresentation. Parties could bind themselves by contract to accept a particular state of affairs even if they knew that state of affairs to be untrue (“contractual estoppel”). Unlike most forms of estoppel, it required no proof of reliance other than entry into the contract itself. However, the position at common law was not the end of the inquiry. There remained the question whether there was a statute to the contrary. The fact that clause 5.8 operated as a contractual estoppel did not prevent consideration of that question; not least because section 3 of the Misrepresentation Act 1967 was expressly directed at contract terms. The mere fact of a contractual estoppel was not, in itself, a complete answer to section 3. That section had to be interpreted so as to give effect to its evident policy which was to prevent contracting parties from escaping from liability for misrepresentation unless it was reasonable for them to do so. How they sought to avoid that liability was subsidiary: Raiffeisen Zentralbank Osterreich AG v Royal Bank of Scotland plc [2010] EWHC 1392 (Comm) applied. Springwell Navigation Corporation v JP Morgan Chase Bank [2010] EWCA Civ 1221 followed. Thornbridge Ltd v Barclays Bank plc [2015] EWHC 3430 (QB) and Sears v Minco plc [2016] EWHC 433 (Ch) disapproved.
(2) Whether a clause passed the test of reasonableness was an evaluative judgment for the trial judge and an appeal court should be slow to interfere. In this case, it could not be said either that the judge misdirected himself in law or took into effect irrelevant factors or ignored relevant ones. There was no ground for interfering with the judge’s overall assessment of the application of the test of reasonableness. He was right to stress the importance of pre-contract enquiries in the field of conveyancing; and right in the conclusion to which he came. If clause 5.8 governed the appellants’ liability, the important function of replies to enquiries before contract became worthless. Although there might be a case where, on exceptional facts, a clause which precluded reliance on replies to enquiries before contract might be held to satisfy the test of reasonableness, it was hard to imagine what those facts might be: Lloyd v Browning [2013] EWCA Civ 1637 followed. FoodCo LLP v Henry Boot Developments Ltd [2010] EWHC 358 (Ch) considered.
(3) A person who entered into a contract in the capacity of trustee might limit his contractual liability to the extent of the trust fund and indicate that he would incur no personal liability in excess of the fund, provided that suitable words were used. English law did not recognise a limitation of capacity on the part of a trustee. The only way in which a trustee might limit his liability to third parties was by contract; whether he had done so was a question of construction of the contract. The statement in the lease that the appellants were contracting as trustee and not otherwise was effective to limit their personal liability in contract. However, it did not serve to limit the appellants’ liability for damages in tort or damages payable under section 2 of the 1967 Act. The default position was that a trustee was personally liable for damages for misrepresentation, which were not damages recoverable in contract. If the contract sought to remove a remedy at common law, it had to do so clearly. In the present case, the form of words used had not done so: Investec Trust (Guernsey) Ltd v Glenella Properties Ltd [2018] UKPC 7 applied. Muir v City of Glasgow Bank (1879) 4 App Cas 337 followed.
Alan Steinfeld QC and Matthew Watson (instructed by CMS Cameron McKenna Nabarro Olswang LLP) appeared for the appellant; Edwin Johnson QC (instructed by Ashfords LLP) appeared for the respondent.
Eileen O’Grady, barrister
