Conveyancing: a pas de deux, not a Dad dance

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

[2018] EWCA Civ 139

Many of our readers will have bought residential property, and have been told (or should have been told) that the principle of “buyer beware” obtains. A  vital exception is made for the seller’s solicitors written answers to the buyer’s particular questions.  Here, the sanctity of this exception is underlined, albeit in a commercial property situation.

Returning to resi, for a moment, an example that could happen to any one of us. My pre-contract enquiry asks “What are your neighbours like?” Answer:  “There was a bit of bother five years ago, but everything is lovely and quiet now”.  I move in.  So do the chapter of Hells Angels who return home after release from a ten stretch. They resume their happy hell raisin’.   I will have a claim for breach of contract against my sellers, and it’s quite likely that the court will rip up the agreement.

The same procedure, albeit with bells on, is used in commercial property, though rescission of a lease is very, very unlikely. With commercial leases, however, rescission is unlikely. First Tower Trustees pits two Guernsey based trustee companies as landlords against a large retailer tenant of a ‘shed’ in Barnsley:  big boys and big boys’ rules.  (The tenant, trading as “The Range”, is an out of town retailer of decorative domestic Stuff that no one really needs.)

This deal made headlines in 2015 (if you read that kind of publication), and has been keeping lawyers busy since. No sooner had CDS moved in, they discovered asbestos  contamination. Obviously asbestos laced frou-frouery isn’t quite the thing, so a spot of decontamination was necessary.  CDS then (counter) claimed against the landlords for their losses: decontamination and short term alternative storage.

Commercial property ingenues may be a bit surprised that the landlords bothered to defend the claim. Perhaps, you thought, a bunch of flowers and a bit off the rent would be a judicious opening gambit. At first instance, before Michael Brindle QC, the landlords went down heavily, but nothing daunted got up, dusted themselves off and called a re-match.  Maybe they were hoping to sneak home on points in front of an appellate panel, more interested in human rights and fluffy family fortunes, a possibility when the listing office wants a bit of a laugh.

Their hopes were dashed. Lewison LJ was sitting with George Leggatt, a retired Brick Court heavy weight.  Their wing man was Colin Rimer, who has an impressive record of being overturned on appeal.  I guess he welcomed a slot on this bench as a retirement alternative to his usual in the park feeding the pigeons.

Let not frivolity, however, cloud my serious match commentary. XXIV Old Buildings’ veteran, Alan Steinfeld knew he had to lead with his chin. When asked by the buyer, in the routine CPSE form about contamination, the landlord had insouciantly suggested the buyer make its own enquiries.  Well, that’s kind of legit, but showing CDS a clean report “accidentally” about a different shed is hardly Queensbury rules.  How was the Anthony Joshua of the Chancery bar going to punch his way out of this one?

As you all know, the common law takes the view – with big boys at least – that they can agree pretty much whatever they like, and not come crying to teacher when it all goes wrong. Even for big boys, however, this bracing robustness is tempered by the Misrepresentation Act 1967:  if the misrepresentor can prove that they had reasonable grounds for believing their own tall stories, and did in fact believe them – note this double test – then it might just get away with it.

On the evidence, the landlords knew full well that the shed was asbestos ridden.   Did that cook their goose? You don’t need to have been in practice since the Moon Landings, to point out that big boys can exclude or restrict liability for pre-contractual wishful thinking.  As long as –  yes, there’s always a proviso –  section 11 of the Unfair Contract Terms Act 1977 doesn’t think it’s going a bit far.

The landlords, advised, by Olswangs as was (now the firm with the longest name in London) had inserted the standard ‘tall stories mitigation’ clause, declaring that CDS hadn’t relied on any pre-contractual blandishments before entering the contract. As is standard, the tenants solicitors would have amended this up to except the solicitors’ written responses to the CPSEs

Kim Lewison had fashioned a useful tall stories measuring stick in FoodCo v Henry Boot, which the senior judiciary has run with it ever since.  It’s what you’d expect:  equality of arms, equality of advice, term open to negotiation and most importantly if your tall story is written down by your lawyers, then that’s sacrosanct.

Oh dear, Muhammad Ali, of Lincoln’s Inn, how will you get off the ropes? You, dear reader, will already of guessed.  Don’t call it an ‘exclusion clause’ call it a “basis of contract” clause.  A basis of contract clause does not limit liability, oh no, so it is outside the mischief of the Act.  It says: “the ball park is the four corners of this document, and there’s no documentary landscape outside of it.”

Contractual estoppel is fairly well established – think Springwell (slight chortle there) and Peekay. Heavyweights can agree to enter a contract on an Alice in Wonderland basis, if they show so chose, with no regard for the facts on the ground.  So urged our prize fighter, but Lewison LJ was dismissive.  Leggatt LJ, riffing on Lewison, had little patience too for the estoppel fantasy.  Contractual estoppel prevents liability from existing at all. It does not exclude a liability created independently by statute existing.  You can deem that you are wearing a prophylactic for congress, but if pregnancy results, you must accept that biology trumps make believe.

It’s wasn’t a hard case to decide. I imagine everyone had a good time (except the landlords) as it’s always nice to see clever people on top of their game.  Significantly, and this is the realpolitik qua Kim Lewison, if this sort of exclusion clause were allowed to flourish, commercial conveyancers can hang up their boxing gloves and go home.  Otherwise, the perfect non-reliance clause would become a holy grail whose pursuit generated many chargeable hours, but would hardly be a Good Thing for the market.

Will this go off to the Supremes? Hardly.  We need a purely commercial case to get the basis of contract v exclusion of liability clause question sorted out –  conveyancing is a traditionally choreographed pas de deux, not a drunken dad dance at a PTA Christmas party.