First Tower Trustees Ltd v CDS Superstores International Ltd

The Court of Appeal upheld the High Court's finding that pre-contractual replies to standard commercial enquiries contained a misrepresentation about asbestos contamination. The court held that so-called non-reliance or "basis" clauses (here clause 5.8 of the lease and clause 12.1 of the agreement for lease) can operate to exclude or restrict liability for pre-contractual misrepresentation and therefore fall within section 3 of the Misrepresentation Act 1967 unless they satisfy the reasonableness requirement in section 11(1) of the Unfair Contract Terms Act 1977.

The court concluded that clause 12.1 (which preserved reliance on written replies by the landlord's solicitors) was reasonable in the circumstances, but clause 5.8 (an absolute non-reliance clause) was not reasonable because it would render pre-contract enquiries nugatory in the conveyancing context. The attempted limitation of liability by describing the landlords as contracting only in their capacity as trustees did not operate to limit statutory damages under section 2 of the Misrepresentation Act. Applications to amend to rely on foreign trust law (Article 32 of the Trusts (Jersey) Law 1984) and to raise a new measure-of-damages argument were refused as case-management or late-pleading matters.

Background and parties. The landlords (First Tower Trustees Ltd and Intertrust Trustees Limited), described as trustees of the Barnsley Unit Trust, granted a lease of Bays 1–3 and an agreement for lease of Bay 4 to CDS (Superstores International) Ltd. Unknown to the tenant but known to the landlords or their agents, the premises were contaminated with asbestos.

Nature of the claim / relief sought. CDS sued for damages for loss caused by misrepresentations made in replies to pre-contract enquiries (Commercial Property Standard Enquiries). The High Court found for CDS and awarded about 1.4 million plus interest; the landlords appealed.

Procedural posture. The appeal was from the judgment of Mr Michael Brindle QC sitting as a Deputy High Court Judge ([2017] EWHC 891 (Ch)). The Court of Appeal heard the appeal.

Issues framed by the court.

• Whether the lease clause 5.8 and agreement-for-lease clause 12.1 were immune from section 3 of the Misrepresentation Act 1967 by being "basis" clauses or whether they were terms which excluded or restricted liability for misrepresentation and so subject to the UCTA reasonableness test (section 11(1)).
• Whether clause 5.8 and/or 12.1 satisfied the reasonableness test.
• Whether the landlords contracting "in their capacity as trustees" limited statutory liability under section 2 of the Misrepresentation Act.
• Whether permission to amend to plead reliance on Article 32 of the Trusts (Jersey) Law 1984 should have been given and whether new points on measure of damages could be raised on appeal.

Reasoning and conclusions. The court analysed the distinction between clauses that define primary contractual obligations and clauses that exclude liability. It held that contractual estoppel (non-reliance clauses) can, in substance, exclude liability for misrepresentation and therefore fall within section 3. The court applied the policy of section 3 and concluded that drafting form should not defeat the statutory protection. Clause 12.1 was reasonable because it expressly preserved reliance on written solicitor replies to enquiries; clause 5.8 was unreasonable in the conveyancing context because it would render pre-contract enquiries illusory and allow a landowner to conceal known defects without accountability. On the trustee point the court held that describing parties as contracting as trustees does not, by necessary implication, limit statutory damages under section 2: statutory misrepresentation liability arises by operation of law and is not automatically curtailed by a contractual statement of trustee capacity. The court also refused permission to appeal the judge's case management decision to refuse a late amendment based on Jersey law and refused to permit a new ground on measure of damages as an impermissible late change in the appellants' case.

Wider context. The judgment clarifies that non-reliance clauses are subject to statutory control under section 3 and emphasises the particular importance of pre-contract enquiries in conveyancing.

Appeal dismissed. The Court of Appeal upheld the High Court's conclusions that (1) the landlords' replies to pre-contract enquiries contained actionable misrepresentations; (2) non-reliance or "basis" clauses which in substance exclude or restrict liability for pre-contract misrepresentation fall within section 3 of the Misrepresentation Act 1967 and must satisfy the UCTA reasonableness test; (3) clause 12.1 was reasonable but clause 5.8 was not and therefore ineffective to exclude liability; (4) the statement that the landlords acted as trustees only did not limit statutory liability under section 2; and (5) case-management refusals to allow late amendments were properly exercised.

Appeal from the High Court (Chancery Division), Deputy High Court Judge Mr Michael Brindle QC: judgment at [2017] EWHC 891 (Ch). The Court of Appeal gave judgment at [2018] EWCA Civ 1396, dismissing the appeal.