First Tower Trustees Ltd & Anor v CDS (Superstores International) Ltd

A landlord may be liable for pre-contractual misrepresentation where it represents that it has no knowledge of environmental problems despite information indicating a serious defect. A tenant’s general duty to inspect does not protect a landlord who gives a materially false answer to pre-contract enquiries.

A non-reliance clause is an exclusion clause where it retrospectively seeks to negate reliance on an earlier representation. It is therefore subject to the reasonableness requirements imposed by Misrepresentation Act 1967 and Unfair Contract Terms Act 1977. A clause preserving reliance on formal replies may be reasonable, but a clause making such replies effectively worthless may not be.

A contractual limitation expressed by reference to trustees’ capacity limits contractual liability, but does not ordinarily extend to pre-contractual misrepresentation without clear words.

The claim concerned warehouse premises at Dearne Mills. The claimants leased Bays 1–3 and agreed to grant a lease of Bay 4 to the defendant. Asbestos was discovered shortly after the transactions, preventing occupation and requiring substantial remedial work. The agreement for Bay 4 was later terminated under its own terms.

The claimants’ original claims for rent and specific performance fell away. The remaining dispute was the defendant’s counterclaim for losses caused by the asbestos. The issues were whether the claimants had made actionable misrepresentations, whether contractual covenants or vacant-possession obligations were breached, whether non-reliance clauses excluded liability, how damages should be assessed, and whether the claimants’ trustee-capacity wording limited liability.

1. Misrepresentation. The S2 report representation and the representation in answer 15.7 of the Replies to Enquiries were false, material and relied upon. By 30 April 2015 the claimants knew of an asbestos-related environmental problem from the VPS email, so the answer that they had not been notified of such problems was no longer accurate. The claim under section 2(1) of the Misrepresentation Act 1967 therefore succeeded, subject to the contractual defences.
2. The claim based on the Firefly report failed because, when read, it caused no material concern and would not have done so if disclosed earlier. The claim based on the S2 report was later excluded by the applicable non-reliance provisions.
3. Covenants and vacant possession. The covenants for quiet enjoyment and non-derogation from grant address interference by the landlord after the demise. They do not ordinarily impose liability for a pre-existing physical defect which prevents occupation. The claims under those covenants were dismissed. The asbestos was also not an impediment to vacant possession in the relevant sense applied in Cumberland Consolidated Holdings Ltd v Ireland; the claim concerning Bay 4 was dismissed.
4. Non-reliance clauses. Following the approach in Springwell v JP Morgan, a clause stating that no representation was relied upon is, in substance, an attempt to exclude or restrict liability where a representation was made and relied upon. It is subject to section 3 of the Misrepresentation Act 1967 and section 11(1) of the Unfair Contract Terms Act 1977. The burden of proving reasonableness lay on the claimants.
5. Clause 12 of the Agreement for a Lease was reasonable because it preserved reliance on written replies by the landlord’s solicitors. The misrepresentation in answer 15.7 was therefore not excluded. Clause 5.8 of the Lease was unreasonable. Without a corresponding saving for replies to enquiries, it would make the conveyancing enquiry process substantially worthless. The section 3 defence accordingly failed for the 15.7 misrepresentation.
6. Damages. The defendant was entitled in principle to recover reasonable asbestos-remediation costs and the cost of alternative warehouse accommodation. The claim required deductions for VAT, unavoidable work, and an unreasonable delay in commencing remedial works. For Bay 4, damages were limited to the period from 19 June 2015 to 15 January 2016, when alternative accommodation should have been obtained.
7. Trustee limitation. The wording that the claimants contracted as trustees and not otherwise limited contractual liabilities to the trust assets. It did not, without clear language extending to connected non-contractual claims, limit liability for pre-contractual misrepresentation. Judgment was therefore given for the defendant on that claim, subject to final calculation of damages.