First Tower Trustees Ltd v CDS (Superstores International) Ltd [2018]

Court: Court of Appeal

Facts: First Tower Trustees Ltd (C) leased a property from CDS (Superstores International) Ltd (D). Before the lease was signed, D's solicitors stated that they had not been informed of any environmental issues with the property. However, D was aware of asbestos contamination but did not disclose this before the lease was executed. The lease contained Clause 5.8, which stated that the tenant (C) acknowledged that the lease was not entered into based on any representations made by D. When C discovered the asbestos, they sought to rescind the contract under Section 2 of the Misrepresentation Act 1967 (MA 1967), claiming misrepresentation.

Issue: Could Clause 5.8, which sought to exclude liability for misrepresentation, effectively bar C's claim under Section 2 of the MA 1967?

Held: The Court of Appeal held that D was liable under Section 2 of the MA 1967. Clause 5.8 was found to be void under Section 3 of the MA 1967 because it did not meet the reasonableness requirement.

Key Judicial Statements - Lewison LJ: He explained that Clause 5.8 attempted to establish a "contractual estoppel," which would prevent C from asserting reliance on D’s representations. This kind of estoppel allows parties to contractually agree to ignore certain facts, even if known to be untrue. However, Lewison LJ noted that Clause 5.8 effectively excluded liability for misrepresentation, which subjected it to the reasonableness test under Section 3 of the MA 1967. He emphasized that while the clause might seem reasonable because the parties were large commercial entities and had legal advice, it did not pass the reasonableness test. The clause's purpose was to exclude liability for misrepresentation entirely, which would undermine the importance of pre-contractual representations and inquiries in commercial contracts.

💡 Leveluplaw: This case underscores that clauses attempting to exclude liability for misrepresentation must be reasonable to be enforceable. Even in commercial contracts, such clauses are subject to scrutiny under the Misrepresentation Act 1967 and the Unfair Contract Terms Act 1977, ensuring that they do not unfairly disadvantage parties relying on pre-contractual representations.