First Tower Trustees Ltd v CDS (Superstores International) Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lewison,Lord Justice Leggatt,Sir Colin Rimer |
| Judgment Date | 19 June 2018 |
| Neutral Citation | [2018] EWCA Civ 1396 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2017/0628/0629/0630 |
| Date | 19 June 2018 |
[2018] EWCA Civ 1396
Lord Justice Lewison
Lord Justice Leggatt
and
Sir Colin Rimer
Case No: A3/2017/0628/0629/0630
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE, CHANCERY DIVISION
Mr Michael Brindle QC (sitting as a Deputy High Court Judge)
HC-2015004437
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Alan Steinfeld QC & Mr Matthew Watson (instructed by CMS Cameron McKenna Nabarro Olswang LLP)) for the Appellants
Mr Edwin Johnson QC (instructed by Ashfords LLP) for the Respondent
Hearing dates: 22 nd and 23 rd May 2018
Introduction and background
This appeal arises out of a misrepresentation which preceded the grant on 30 April 2015 of a lease of Bays 1–3 Dearne Mill, Darton, Barnsley and entry into an agreement for lease of Bay 4 on the same day. In each case, unknown to the tenant, but known to the landlords or their agents, the Bays were so contaminated with asbestos that they were dangerous to enter. Mr Michael Brindle QC, sitting as a judge of the Chancery Division, held that the landlords were liable, and gave judgment against them for £1.4 million plus interest. His judgment is at [2017] EWHC 891 (Ch), [2017] 4 WLR 73.
The misrepresentation was contained in replies to enquiries before contract. Enquiries before contract form an important part of ordinary conveyancing, both residential and commercial. In an ideal world sellers would behave in the way that Farwell J described in Terrene Ltd v Nelson [1937] 3 All ER 739:
“In the ordinary case, a purchaser has to go for his information to the vendor, but, bearing in mind the principle of caveat emptor, he is bound to make proper inquiries for himself. But he must, in almost every case, in the first instance, at any rate, seek his information from the vendor, who knows the facts, whereas the purchaser probably does not know them. When a purchaser, with a possible view of making an offer for the property, seeks information from the vendor, the vendor, of course, is bound to the best of his ability to supply him with accurate information.” (Emphasis added)
However, the world is not ideal and the buyer often meets a stonewalling response, saying no more than the buyer must satisfy itself.
Bays 1 – 4 were warehousing accommodation in a building owned by First Tower Trustees Ltd and Intertrust Trustees Ltd. Both these companies were registered in Guernsey and were described in the transactional documents as trustees of the Barnsley Unit Trust. The significance of this will become apparent in due course. The intending tenant was CDS (Superstores International) Ltd, a retailer which trades as The Range.
Before contract the tenants were given a copy of a report prepared by an organisation called S2 which, according to the landlords, related to Bays 1 to 3. That report indicated to CDS that there was no problem with asbestos. At trial, however, the landlords asserted that the report in fact related to quite different property. How this came about is mysterious, but the judge was not required to make and did not make any findings about that.
More importantly, CDS through its solicitors raised enquiries before contract on a Commercial Property Standard Enquiries form. The landlords' solicitors answered them on 16 February 2015. The enquiries themselves are preceded by an interpretation section, the material parts of which are as follows:
“4. The Buyer acknowledges that even though the Seller will be giving replies to the enquiries, the Buyer should still inspect the Property, have the Property surveyed, investigate title and make all appropriate searches and enquiries of third parties.
5. In replying to each of these enquiries and any supplemental enquiries, the Seller acknowledges that it is required to provide the Buyer with copies of all documents and correspondence and to supply all details relevant to the replies, whether or not specifically requested to do so.
6. The Seller confirms that pending exchange of contracts or, where there is no prior contract, pending completion of the Transaction, it will notify the Buyer on becoming aware of anything which may cause any reply that it has given to these or any supplemental enquiries to be incorrect.”
Enquiry 15.4 (b) asked for details (so far as the Seller was aware) of the existence of any hazardous substances including asbestos or asbestos containing materials. The reply was: “The Buyer must satisfy itself”. Enquiry 15.5 asked for details of notices, correspondence relating to real or perceived environmental problems that affected the property, including communications relating to the actual or possible presence of contamination at or near the property. The reply, so far as material, was: “The Seller is not aware of any such notices etc but the Buyer must satisfy itself”. Enquiry 15.7 asked for details of any actual, alleged, or potential environmental problems (including actual or suspected contamination) relating to the property. The answer was: “The Seller has not been notified of any such breaches or environmental problems relating to the Property but the Buyer must satisfy itself”.
On 16 April 2015 the landlords' agents received a copy of a report produced by a company called William Martin Firefly Limited which indicated that there was some asbestos in the Bays. On 20 April 2015 the landlords' agents received an email from VPS, a specialist firm that they had used. That reported a health and safety risk caused by asbestos near the loading bay. The email also stated:
“Please be advised that we have added a notice onto our system and we are unable to enter this property until we receive the relevant confirmation from yourselves that the site is safe. This would have to be in the form of a clean air certificate or asbestos report.”
The remarks of VPS related specifically to Bays 1–3, which were untenanted at the time, but they also raised the possibility that Bay 4, at that time let to Kingspan Ltd, might be unsafe to enter for the same reason.
Despite the terms of paragraph 6 of the interpretation section of the Enquiries form, none of this information was passed on to CDS before completion of the lease and agreement for lease on 30 April 2015.
The judgment
The judge was in no doubt that the representations were false. As he put it at [12]:
“The S2 report was represented to relate to bays 1–4, but according to the claimants' own pleaded case it did not. It said nothing relevant about the asbestos problem which existed and prevented the premises from being occupied until remedial work was carried out. This is made patently clear by the VPS e-mail, of which the defendant had no knowledge until after the lease and agreement had been entered into. It has been stressed on behalf of the claimants that the defendant had significant remedial work to do in any event, on a not insubstantial scale, but this does not in my judgment derogate from the clear fact that the premises required substantial further work to remedy the asbestos problem, which was wholly contrary to what the defendant had been told before the lease (and the agreement for a lease) were entered into. I should note that I reject the submission that this report was somehow out of date.”
He considered that although there might be arguments about which enquiry was the relevant one, there was a clear case of misrepresentation under enquiry 15.7 at least in relation to the email from VPS. There is no appeal against his conclusion.
Having so found, the judge had to consider whether the landlords had any defence. No one gave evidence on the landlords' side. They relied on particular clauses in both the lease and the agreement for lease as relieving them of potential liability.
Clause 5.8 of the lease (which related to Bays 1–3) provided:
“The tenant acknowledges that this lease has not been entered into in reliance wholly or partly on any statement or representation made by or on behalf of the landlord.”
Clause 12 of the agreement for lease (which related to Bay 4) contained the following:
“12.1 The Tenant acknowledge and agree [sic] that it has not entered into this Agreement in reliance on any statement or representation made by or on behalf of the Landlord other than those made in writing by the Landlord's solicitors in response to the Tenant's solicitors' written enquiries.
12.2 Nothing in this Agreement shall be read or construed as excluding any liability or remedy resulting from fraudulent misrepresentation.”
The judge held that clause 12 of the agreement for lease did not help the landlords because the representation was indeed made by the landlords' solicitors in response to written enquiries. There was debate before him whether clause 5.8 of the lease was a so-called “basis” clause or an attempt to exclude liability for misrepresentation. He decided that it was the latter; and went on to hold that it did not satisfy the test of reasonableness under section 11 (1) of the Unfair Contract Terms Act 1977. Those conclusions which grounded his decision on liability are challenged on this appeal.
The judge went on to consider whether the fact that the landlords had entered into both the lease and the agreement for lease “in their capacity as trustees of the Barnsley Unit Trust and not otherwise” operated to limit their liability for statutory liability for damages for misrepresentation. He held that although words to that effect may limit a trustee's liability in contract they did not have effect to limit the trustees' exposure to that statutory liability. That conclusion is also challenged on this appeal.
Allied to this point is an application for permission to appeal against the...
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