Public house — Defendants entering into licence as tenants — Trade in decline under previous tenants — Whether partial misrepresentation as to amount of annual trade — Whether figures could be expected to fluctuate year-on-year — Defendants falling into rent arrears — Plaintiffs seeking possession, rent and licence fees — Defendants counterclaiming on misrepresentation Whether exclusion clause on misrepresentation reasonable — Whether defendants would have proceeded notwithstanding drop in sales — Judgment for plaintiffs — Counterclaim dismissed
In 1991, the plaintiff freeholder of Elburton Hotel Public House, Elburton, Devon, entered into an agreement with the defendants, as licensees in respect of the hotel. For the previous year the defendants had very successfully run a pub five miles away from Elburton village, but had no other business experience. On learning of the availability at Elburton Hotel, they contacted Mr W of the plaintiffs. His job title was “consultant” and his task was to find potential tenants for the pubs owned by the plaintiffs. Despite their title, the plaintiffs’ consultants were salaried employees. Mr W sent them a booklet with the particulars relating to Elburton including figures to March 1991 of 356 “barrelage” of beer and to March 1990 of 370 barrels.
Four meetings took place thereafter and after negotiation, the figure for rent was agreed at £31,000 pa in September 1991. The Elburton was a tied house and a tenant was required to enter into a minimum purchase obligation from the supplier reduced to 300 barrels for the first year. The rent was set by a panel of the plaintiffs taking into account the average maintainable trade (AMT) among other factors. On entering into occupation, the defendants found that the business had gone into serious decline. It continued its decline and they asked for relief of the full burden of rent, which the plaintiffs refused. The plaintiffs sought possession of the premises and rent arrears after the defendants failed to vacate on a notice to quit. The defendants counterclaimed on misrepresentation, inter alia, that the plaintiffs should have disclosed up to date trading figures, ie until September 1991.
Held The counterclaim was dismissed.
1. The plaintiffs’ submission was accepted that the figures supplied in the particulars did not represent a feature of the pub, but a specific barrelage figure up to a specific date. No person reading the letting particulars with reasonable care could have concluded that it was a pub which was continuing to trade at 356 barrels pa. On the contrary the figures had indicated a significant fall between March 1990 and 1991.
2. Further, it was likely on the balance of probabilities that the defendants had discovered the continuing falling figures just before they signed the agreement. However, even with the latest figures available to them, the agreement would have been signed in the same terms.
3. The agreement contained an exclusion clause to the effect that the “lessee has not entered into this agreement … wholly or partly on any statement or representation made by the company … or its employees … and has made its own independent enquiries …”. If the court had been wrong on the other issues, the plaintiffs would not have been able to rely on the exclusion clause which was not reasonable when the agreement was entered into.
4. The other misrepresentation complained of was that the plaintiffs could have increased the barrelage to 400 barrels pa. However, on the evidence, it would appear that that was a figure of which the defendants were more than willing to persuade themselves that they would achieve.
Nicholas Dowding (instructed by Masons) appeared for the plaintiffs; Mark Brealey (instructed by Charles Russell) appeared for the defendants.
