In First Tower Trustees Ltd and another and CDS (Superstores International) Ltd [2017] EWHC B6 (Ch), the High Court considered a misrepresentation claim brought by a commercial tenant.

The prospective landlord had stated in its replies to enquiries that it was unaware that asbestos was present, but failed to update the replies when it subsequently became aware of asbestos.

The High Court has considered a misrepresentation claim brought by a commercial tenant where the landlord failed to update its replies to enquiries.

The landlord, a trust company, stated in replies to pre-contract enquiries that it was unaware of notices or breaches relating to environmental problems. Later the trustees became aware of the presence of asbestos; however, they failed to update the replies before entering into a lease of warehouse premises. The tenant claimed damages for the cost of remedial works and alternative accommodation.

The court rejected the tenant’s claim for breach of the landlord’s covenants for quiet enjoyment, non-derogation from grant and vacant possession.

However, it held that the landlord trustees were liable for misrepresentation. It considered the effectiveness of a clause in the lease that purported to exclude liability for reliance on representations made by the landlord. Section 3 of the Misrepresentation Act 1967 required the application of the reasonableness test in section 11 of the Unfair Contract Terms Act 1977. Applying this test, it held that the clause was not reasonable in the circumstances.

Although the lease stated that the trustees contracted in their capacity as trustees of a specified trust, the drafting did not purport to limit liability for pre-contract misrepresentation. The trustees’ liability for misrepresentation was not limited to the extent of the trust assets.

The case is a useful reminder:

  • Of the principles in determining the effectiveness of an exclusion clause, particularly in property transactions.
  • That if a seller or landlord makes a representation in replies to enquiries, and later becomes aware that it is untrue, it should update those replies where appropriate.
  • That trustees may want to limit as appropriate their liability for pre-contract misrepresentation.

For further information relating to the points raised in this article, please contact Rob Cooke or a member of the Commercial Property Disputes team.

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

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