Failure to Disclose Asbestos Finding Leads to Misrepresentation Claim
The case of First Tower Trustees v CDS (Superstores International) Limited, was a claim brought by a tenant to recover damages following the landlord’s misrepresentation of the condition of a warehouse.
Prior to completion of the lease, the tenant made the usual pre-contractual enquiries which included questions about environmental issues. The landlord represented that it was not aware of any notices relating to environmental problems, had not been notified of any actual, alleged or potential breaches of environmental law and asked the tenant to make its own enquiries. The replies also stated that the landlord would update its responses if circumstances changed.
Following completion of the lease, the tenant’s contractors found a large volume of asbestos whilst completing the fit-out works. The tenant spent in excess of £500,000 to remove the asbestos and rent alternative accommodation whilst the premises were made safe. The tenant issued a claim and sought to recover its losses on the basis that the landlord had misrepresented the condition of the premises by failing to update its replies even though it had received an environmental report recording the presence of asbestos and a separate email from a contractor warning about the problem.
The landlord sought to defend the claim on the basis of a non-reliance clause in the lease which stated that the tenant had not gone into occupation on the basis of any representation by the landlord or its agents. As the purpose of the non-reliance clause was to retrospectively alter the character of what the landlord had represented about the condition of the premises, it was a form of exclusion clause and was potentially unenforceable against the tenant if it was found to be unreasonable under the Misrepresentation Act 1967.
The court had little difficulty in finding that the non-reliance clause was ‘highly unreasonable’ because it is well known that giving accurate replies to enquiries are fundamental to the conveyancing process. If the non-reliance clause were to have effect then pre-contractual enquiries would be deprived of any practical use because the landlord could simply withhold important information, ask the tenant to carry out its own investigations and avoid any claim from the tenant. The court did however point out that if the non-reliance clause had drawn a distinction between any representations made by the landlord and replies to enquiries then it would have then it would have preserved the integrity of the landlord’s replies and would, as a result, have been reasonable.
The landlord was ordered to pay damages equivalent to the costs of the remedial work to remove the asbestos and most of the tenant’s costs of finding alternative accommodation but a deduction was made because the court found that the tenant could have started the works more quickly. If the landlord had simply updated its enquiries then it could have avoided having to pay the costs that the tenant incurred in letting alternative accommodation as well as the legal cost of the proceedings.