Home Information Cases FoodCo UK LLP (T/A Muffin Break) & Ors v Henry Boot Developments Ltd (2010)

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FoodCo UK LLP (T/A Muffin Break) & Ors v Henry Boot Developments Ltd (2010)

Summary

A non-reliance clause in an agreement for lease excluded liability for innocent and negligent misrepresentations, but not fraudulent ones, and the claimant tenants failed to show that representations made by the landlord were false and fraudulently made.

Facts

The claimant tenants (T) claimed that they had entered into agreements for lease on the basis of misrepresentations by the defendant developer (H). H had developed a facility accessible via a roundabout from junction 11 of the M20. Its principal components were a petrol filling station and an amenity building housing both retail and catering units. The facility was not a "Motorway Service Area" (MSA) within the relevant government policy because the amount of retail space was too large. T were retailers and caterers which had entered into agreements for lease in respect of units at the facility. H's marketing material and a report on which the marketing material was based had predicted 88,000 visitors a week on opening. That prediction proved wildly optimistic. T alleged that H had made misrepresentations about the extent of motorway signage that would be provided for the site, about the likely number of visitors to the site, and about the facilities that the site would offer. They said H made the misrepresentations fraudulently; alternatively without reasonable grounds for believing that they were true. They alleged that written misrepresentations were augmented by oral misrepresentations. The agreements for lease contained a clause providing that the tenant in entering into the agreement had not relied upon any representation or warranty whatsoever whether written or oral expressed or implied made by or on behalf of H, save for written replies given by H's solicitors to the enquiries raised by the tenant's solicitors.

Held

(1) What statements were covered by a non-reliance clause was a question of construction of the clause. That was subject to the important principles that, as a matter of public policy, a contracting party could not exclude liability for his own fraud; and if he wished to exclude liability for the fraud of his agent he must do so in clear and unmistakable terms on the face of the contract, HIH Casualty & General Insurance Ltd v Chase Manhattan Bank (2003) UKHL 6, (2003) 1 All ER (Comm) 349 followed. The clause in the instant case contained no clear words acknowledging non-reliance on fraudulent misrepresentations. Therefore the non-reliance clause covered innocent and negligent misrepresentations, but not fraudulent ones. A non-reliance clause could give rise to both an evidential estoppel and also an estoppel by contract, Peekay Intermark Ltd v Australia & New Zealand Banking Group Ltd (2006) EWCA Civ 386, (2006) 2 Lloyd's Rep 511 followed. The effect of the non-reliance clause was that T were precluded from raising any claim for non-fraudulent misrepresentation except in so far as the claim arose out of written replies given by H's solicitors to the T's solicitors. (2) The clause fell within the Unfair Contract Terms Act 1977 s.8 and as such had to satisfy the test of reasonableness, Trident Turboprop (Dublin) Ltd v First Flight Couriers Ltd (2009) EWCA Civ 290, (2010) QB 86 considered. The clause satisfied the test of reasonableness: the aspiration of certainty was a reasonable one for the parties to adopt; there was no substantial imbalance of bargaining power between the parties; T were advised by solicitors; the term itself was open to negotiation; the clause expressly permitted reliance on any reply given by H's solicitors to the tenant's solicitors. It followed that T could only succeed if they demonstrated that H made fraudulent misrepresentations. (3) The subjective state of mind of the representor was crucial in deciding whether a representation was fraudulently made. It was not enough that, objectively viewed, a prediction would be understood by the representee as implicitly representing that the maker of the prediction had reasonable grounds for making the prediction. It was also necessary to show that the representor understood the representation in that sense. It was not enough to establish a lack of reasonable grounds for a belief in order to prove the necessary ingredient of dishonesty, Derry v Peek (1889) LR 14 App Cas 337 HL followed. The mere fact that a person held a belief that was not based on reasonable grounds was not fraud, although it might be evidence of fraud. The mere description of the site as an MSA did not carry with it an implicit representation about signage of a particular quantity or type. The term "MSA" had no defined meaning and there was no such thing as signage typically associated with an MSA. The representations made by H were true when made, or were not fraudulently made because H had reasonable grounds for making them or an honest belief in the representations in the sense in which they were made. In the circumstances no duty to correct arose.

Judgment for defendant

Chancery Division
Lewison J
Judgment date
3 March 2010
References

LTL 9/3/2010 : [2010] EWHC 358 (Ch)

Previous Members

timothy-c-dutton,Timothy Dutton QC