Misrepresentation on the importance in providing reliable information
In the recent case First Tower Trustees Ltd and another v CDS (Superstores International) Ltd (2017) dealt with a case brought by a commercial tenant who claimed for misrepresentation.
In replies to pre-contract enquiries prior to entering into a lease, the landlord stated that it had not been notified of any actual, potential or alleged breaches of environmental law or any other environmental problems relating to the property but “the Buyer must satisfy itself”. The prospective landlord then failed to update the replies when it subsequently became aware of asbestos. The tenant successfully claimed damages for negligent misrepresentation, representing the cost of remedial works and alternative accommodation while these were being carried out.
A misrepresentation is a statement about a property which is not true before the existence of the contract. There are three types of misrepresentation:
NEGLIGENT: A representation made carelessly and in breach of duty owed between the parties to take reasonable care that the representation is accurate; and
FRAUDULENT: Where a false representation has been knowingly made, or without belief in its truth to induce another party;
INNOCENT: A representation that is neither fraudulent nor negligent.
The case shows the importance of keeping replies to precontract enquiries under review until completion and of notifying the other side if anything changes between the date the replies are drafted and the date of completion. It highlights the need to provide full disclosure where possible but also to consider how helpful responses to enquiries are. When acting for trustees entering into contracts and deeds, this case shows the importance of including a widely drafted trustee limitation provision that refers to any connected non-contractual claims.
Our property management team frequently answers such questions for clients. This is time-consuming and carries risk and responsibility as seen by this ruling. You can contact our property management team here.