Summary

A landlord was liable for the cost of remedial works to remove asbestos and of alternative warehouse accommodation whilst those works were carried out where it had misrepresented to the tenant, in its replies to pre-contract enquiries, that it had no knowledge of any environmental problems affecting the property. A clause in the lease which purported to exclude liability for reliance on any statement made by the landlord failed the test of reasonableness under the Misrepresentation Act 1967 s.3.

Facts

The court had to consider a counterclaim brought by a commercial tenant for damages relating to losses resulting from the unavailability of premises due to asbestos damage.

The claimant landlord, a trustee company, leased warehouse premises to the tenant. By cl.5.8 of the lease, the tenant acknowledged that it had not entered into the lease in reliance on any representation made by the landlord. The lease also provided that the landlord contracted in its capacity as trustees of a specified trust and not otherwise. In its replies to pre-contract enquiries, the landlord stated that it was unaware of any environmental problems relating to the property. The lease completed on 30 April 2015 and the tenant took possession on 6 May. It began various works pursuant to a pre-condition of the lease. On 14 May, asbestos was discovered. Remedial works commenced in November 2015 and the premises were ready for occupation on 15 January 2016. The landlord abandoned a claim for unpaid rent, leaving the tenant's counterclaim for damages for the period 1 May 2015 to 15 January 2016 to be determined. The tenant claimed that it had entered into the lease on the basis of the landlord's representations that there were no problems with asbestos at the premises, whereas, in fact, the landlord had become aware on 16 and 20 April 2015 of reports indicating the presence of asbestos. The landlord denied prior knowledge of the presence of asbestos. It also claimed that the trustees' liability was limited to the extent of the trust assets.

Held

(1) Although the lease was subject to the usual implied covenant of the landlord not to derogate from grant, there had been no act or omission by the landlord after the grant of that lease which derogated from its grant or interfered with the tenant's quiet enjoyment of the premises. The interference which arose was the tenant's inability to occupy the premises until works had been carried out pursuant to the pre-condition, Southwark LBC v Mills [2001] 1 A.C. 1 followed (see paras 18-20 of judgment).

(2) The landlord had made false representations to the tenant about the presence of asbestos and the need for substantial remedial works to deal with the problem. Those misrepresentations were material and had been relied upon by the tenant. Although a clause which was part of the basis upon which the parties had contracted was not treated as an exclusion or exemption clause and was not subject to statutory control, the non-reliance clause at cl.5.8 of the lease was an attempt retrospectively to alter the character and effect of what had gone before and was therefore in substance an attempt to exclude or restrict liability, Springwell Navigation Corp v JP Morgan Chase Bank (formerly Chase Manhattan Bank) [2010] EWCA Civ 1221 followed. The Misrepresentation Act 1967 s.3 was therefore engaged and the burden was on the landlord to show that cl.5.8 satisfied the test of reasonableness. Given the well-recognised importance of pre-contractual enquiries, it was highly unreasonable for the landlord to withhold, in its replies to those enquiries, knowledge of a serious problem. There was therefore no impediment to liability in respect of the misrepresentation (paras 12, 15, 30-31, 33-35, 38, 41).

(3) The tenant was entitled to the full costs of the asbestos remedial works and the costs of alternative warehouse accommodation whilst the premises were incapable of use. However, the length of that period resulted in part from the tenant's delay in progressing the works, which should have commenced by 16 September 2015. A reduction was made accordingly (paras 42, 44-46).

(4) With regard to the trustees' liability, there was no reason not to give the words of the lease their clear meaning. The limitation of liability was a reasonable one and it had been open to the tenant to challenge it if it thought fit. However, the clause did not purport to limit liability for pre-contract misrepresentation. Therefore, the trustee limitation provisions were effective only to limit the landlord's contractual liability to the extent of the trust assets but did not limit the claim in misrepresentation. Although a claim under the 1967 Act resulted in a contract between representee and representor, it did not follow that a limitation of contractual liability extended, without words to that effect, to pre-contractual liability. Accordingly, the misrepresentation claim relating to the replies to enquiries was not limited, as against the tenant, to the extent of the trust fund (paras 54, 56, 58-59).