Axa Sun Life Services Plc v Campbell Martin Ltd & Ors [2011] EWCA Civ 133

Case No A3/2010/1024[2011] EWCA Civ 133IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
Venue BRISTOL DISTRICT REGISTRY
MERCANTILE LIST
HH Judge Graham Jones (sitting as a Deputy High Court Judge)
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 18/02/2011
Before
LORD JUSTICE RIXLORD JUSTICE WILSONLORD JUSTICE STANLEY BURNTON
Between
AXA SUN LIFE SERVICES PLCAppellantCAMPBELL MARTIN LTDRespondentsBRENDON PARTINGTONRespondentGARY TIBOR HOSZNYAKRespondentAXA SUN LIFE SERVICES PLCAppellantHARRY BENNETT & ASSOCIATES LTDRespondentsHARRY EDWARD JOHN BENNETTRespondentAXA SUN LIFE SERVICES PLCAppellantIDEAL FINANCIAL PLANNING LTDRespondentAXA SUN LIFE SERVICES PLCAppellantKYMIN MORTGAGE SERVICES LTDRespondentsRICHARD JOHN HILLRespondentSIMON JOHN ASTONRespondent
Simon Picken QC and Susanne Muth instructed by Connell Associates appeared for Appellant in each appeal.Andrew Spink QC and John Virgo instructed by Farrells appeared for Respondents Ideal Financial Planning Ltd, Harry Bennett And Associates Ltd, and Harry Edward John Bennett.Gerard McMeel instructed by Everett, Tomlin, Lloyd & Pratt appeared for Respondents Kymin Mortgage Services Ltd, Richard John Hill and Simon John Aston. for The Respondents Campbell Martin Ltd, Brendon Partington and Gary Tibor Hosznyak were not represented.Hearing Hearing dates: 15 & 16 December 2010
JudgmentLord Justice Stanley Burnton :Introduction
[1]This is the appeal of AXA Sun Life Services Plc (to which I shall refer as “AXA”) against the orders dated 24 March 2010 made by HH Judge Graham Jones, sitting as a Deputy High Court Judge in the Mercantile Court in Bristol. The orders were made in five claims, on the trial of preliminary issues that were common to each of the claims, and related to the effect of certain provisions in the standard form agreements entered into between AXA and its appointed representatives. The preliminary issues concerned the construction of the contractual provisions and the effect, if any, on them of the Unfair Contract Terms Act 1977 (universally referred to as “UCTA”). The Defendants to AXA’s claims are the companies that entered into such agreements and were appointed by them as AXA’s authorised representatives and the personal guarantors of the companies’ liabilities to AXA.[2]The Defendant companies in question are Campbell Martin Ltd, Harry Bennettand Associates Ltd, Ideal Financial Planning Ltd and Kymin Mortgage Services Ltd. A fifth claim had been brought against Mortgage UK Financial Services Ltd and its guarantors. The issues in those proceedings are similar to those in the proceedings to which I have referred. Mortgage UK Financial Services Ltd was dissolved on 12 May 2009. AXA’s claim against its guarantors was stayed by order dated 15 December 2009 on the surviving personal Defendants undertaking to be bound by the determination of the preliminary issues in the other proceedings. Those Defendants did not, therefore, play any part in the proceedings before the judge, and will be similarly bound by the result of this appeal.

The agreements

[3]I can take the Campbell Martin agreement and AXA’s claim against it and its directors as typical. It is dated 31 October 2004, and is entitled “AXA Assurance Adviser Appointment Agreement”. Campbell Martin Ltd is defined as “the Adviser”. There are three bullet points on the front title page, of which the second states:
“This Agreement contains the terms on which [AXA] appoints the Adviser to act as their agent and provide the Services (as later defined). The Adviser has agreed to accept such appointment.”
AXA is referred to in the first person, and the Adviser in the second person. The agreement is signed by the parties on the following pages. There follows a list of contents, in capital letters, giving a heading for each clause of the agreement. For present purposes, the pertinent clauses and headings are: clause 1, “Appointment”; clause 2, “Limits of Authority”; clause 3, “Your obligations”; clause 5, “Commission, Procuration Fees and Charges”; clause 7, “Business Benefits Allowance and Development Allowance”; clause 13, “Term and Termination”; clause 15, “Set Off”; clause 24, “Entire Agreement”; and clause 28, “Definitions”.[4]“Services” are defined in clause 28 as follows: “making arrangements for or with a view to another person buying (or otherwise bringing about a purchase of) a Product from an AXA Product Provider or a member of the AXA Mortgage Panel or the General Insurance Panel and advising a person on the merits of buying or selling a Product, or exercising any right conferred by a Product”.[5]“AXA Product Providers” are defined in clause 28 as “those companies listed in Schedule 2 as amended from time to time”. Those companies are all companies in the AXA Sun Life Group of companies. Clause 1 is, as mentioned above, headed “Appointment”. Clause 1.1 is as follows:
“1.1 This Agreement sets out the terms of your appointment as our Appointed Representative (subject to Clause 1.3) and agent (subject to clause 1.4) to provide the Services in relation to such of the Investment Products, Mortgage Products, Protection Products and/or the General Protection Panel Products as are set out in Schedule 5 (your “Appointment”). You agree to provide the Services in the UK from the dates specified in clause 1.4 on the terms of this Agreement. By signing this Agreement you accept the Appointment on those terms. Insofar as, at the Effective Date, you are a party to any Adviser Appointment Agreement (or other agreement appointing you as an Appointed Representative and/or agent of any member of the AXA Group howsoever named) with us or any member of the AXA Group in relation to Investment business, this Agreement shall operate as a variation of that agreement.”
[6]“Investment Products”, “Mortgage Products”, “Protection Products” and “General Insurance Products” are all defined terms. The appointment of the Appointed Representative is by clause 1.3 made subject to the required approvals of and registration with the Financial Services Authority. Clauses 1.8 and 1.9 provide:
“1.8 In the event a Customer seeks a mortgage contract or General Insurance Contract of a type not made available by us under this Agreement, we agree that you may, strictly in accordance with the AXA Compliance Manual, effect introductions to other companies providing such contracts. 1.9. In the event a Customer seeks a Pure Protection Contract of a type not made available by us under this Agreement, we agree that you may, strictly in accordance with the AXA Compliance Manual, effect introductions to other companies providing such contracts, until close of business on 13 January 2005, or such other date as we may notify to you.”
[7]Clause 2.1, under the heading “Limits of Authority”, provides:
“2.1. Your authority under this Agreement is restricted to providing the Services only in relation to such of the Products provided by AXA Product Providers, the AXA Mortgage Panel, the General Insurance Panel as are specified in Schedule 5 and to providing the Services in accordance with the terms of: 2.1.1 this Agreement; 2.1.2 the FSA Handbook; 2.1.3 the AXA Professional Development Programme; 2.1.4 the AXA Advice Standards; 2.1.5 the AXA Handbook; 2.1.6 the AXA Compliance Manual; 2.1.7 any sales processes, and/or training programmes or instructions provided by AXA in relation to the provision of the Services; and 2.1.8 all applicable laws from time to time in force.” 2.1.1 this Agreement; 2.1.2 the FSA Handbook; 2.1.3 the AXA Professional Development Programme; 2.1.4 the AXA Advice Standards; 2.1.5 the AXA Handbook; 2.1.6 the AXA Compliance Manual; 2.1.7 any sales processes, and/or training programmes or instructions provided by AXA in relation to the provision of the Services; and 2.1.8 all applicable laws from time to time in force.”
[8]Clause 3, “Your Obligations”, includes detailed provisions designed in part to ensure compliance with FSA requirements, but also including the following restrictions:
“3.23 subject to clause 1.8 and clause 1.9, you will not, without limitation, be engaged concerned or interested either directly or indirectly and whether on your own behalf or on behalf of or in association with others and in any capacity whatever in carrying on Investment Business, General Insurance Business, Pure Protection Business or Mortgage Business in competition with us anywhere within the U.K.; 3.24 you will not, without limitation, be appointed as an Appointed Representative by, or carry on Investment Business, Mortgage Business, Pure Protection Business or General Insurance Business as an Appointed Representative for, any other Firm; 3.25 you will not, without limitation, be engaged in any business other than a business we approve in writing;”
[9]Clause 5 provides for the payment of commission on the sale of Products, provided the premium is received, and for the claw back of commission if a customer cancels his purchase of a Product. Clause 5.5 is one of the provisions in issue in these appeals:
“5.5 Any decision that we make on your entitlement to commission under clause 5.1 or upon any calculation by us of Commission due or repayable under this clause 5 shall, save for manifest error, be final and conclusive and binding on you.”
[10]Clause 7 incorporates Schedule 4. In paragraph 1.1, AXA undertook to provide an Initial Development Allowance of £77,000 which “must be used for the purposes of developing your business as approved by us”, together with 8 laptop computers, portable printers and undefined “Mortgage Solutions”, and a Business Benefits Allowance of £43,032, being “the provision of support … to enable you to conduct the Services”. Schedule 4 laid down annual commission targets, and provided a formula for repayment in part of the Initial Development Allowance and Business Benefits Allowance if the commission earnings in any year were less than the target. Any such repayment could be deducted by AXA from commissions otherwise due. If the agreement was terminated before 5 years from its commencement, any outstanding amounts of those benefits would be repayable by the Appointed Representative. Paragraph 1.6 of the Schedule is another provision in issue:
“1.6 A statement or certificate signed by or on behalf of us as to all or any part of the Monies due to us from you under the terms of this Schedule shall, save for manifest error, be final and conclusive and binding on you.”
[11]Clause 13 provides that the agreement has a term of 5 years from its commencement, subject to earlier termination in accordance with its terms. Clause 13.2 authorises AXA to terminate the agreement summarily on the occurrence of a Termination Event as defined in Schedule 3 or on 2 months’ written notice at any time. Conversely, by clause 13.3, the Appointed Representative may terminate the agreement on giving 2 months’ written notice at any time. The definition of Termination Events is in the main conventional, including insolvency, gross misconduct and breach of FSA rules, but also including use of the Development Allowance for a purpose not approved by AXA.[12]Clause 15 is as follows:
“15.1 We may at any time or times without notice to you set off any liability you have to us, or any Affiliate, or any company within the AXA Group against any liability that we have to you (however arising and whether any such liability is present or future, liquidated or unliquidated). Any exercise by us of our rights under this clause shall be without prejudice to any other rights or remedies available to us under this Agreement or otherwise. 15.2 All Monies payable by you to us under this Agreement shall be paid in full without any deduction or withholding other than as required by law and you will not (and renounce any right you may have to) assert any credit, set-off or counterclaim against us to justify withholding payment of any such Money or amount in whole or in part.”
Clause 15.2 is another clause the effect of which is in issue.[13]The last clause in issue in these appeals is the Entire Agreement clause, clause 24:
“This Agreement and the Schedules and documents referred to herein constitute the entire agreement and understanding between you and us in relation to the subject matter thereof. Without prejudice to any variation as provided in clause 1.1, this Agreement shall supersede any prior promises, agreements, representations, undertakings or implications whether made orally or in writing between you and us relating to the subject matter of this Agreement but this will not affect any obligations in any such prior agreement which are expressed to continue after termination.”
[14]Campbell Martin’s liabilities under the agreement were guaranteed by its directors, Brendon Partington and Gary Tibor Hosznyak. The terms of their written guarantee are not material to the issues in their appeal.

The proceedings

[15]AXA’s Particulars of Claim in the Campbell Martin claim plead that the Campbell Martin agreement was terminated on 3 September 2005, and that on termination there became due from the company and its guarantors the sum of £84,675.28, comprised of £78,634.99 being the outstanding balance of the Business Benefits and Development Allowance and commission claw back of £6,040.29.[16]In their re-amended defence, the Defendants allege that the agreement incorporated certain implied terms imposing obligations on AXA, and that they were induced to enter into the agreement by negligent and fraudulent misrepresentations and/or by collateral warranties given by AXA. These allegations are reflected in the preliminary issues which I set out below. The Defendants allege that AXA caused them loss and damage by its breach of the implied terms, by its misrepresentations and by breach of its collateral warranties.[17]AXA’s amended reply pleads that the Defendants are precluded from alleging misrepresentation (other than fraudulent misrepresentation) or that there were any collateral warranties given by it by clause 24 of the agreement, which also excluded the alleged implied terms. AXA pleads that the clause satisfies the requirements of UCTA.[18]The Campbell Martin defence differs from those of other Defendants in one respect. It does not allege that AXA had represented or promised the defendants that the agreement would be a multi-tie agreement, rather than the sole tie agreement that it is.[19]In the claim against Harry Bennett and Associates Ltd (“the Bennett claim”), that company pleads that Mr Bennett had previously, since 28 February 2003, traded as an appointed representative of AXA in the name of Gwent & Forest Mortgage Centre. His company replaced Gwent & Forest Mortgage Centre as a representative of AXA, and was appointed on 15 April 2005. It is common ground that the agreement was terminated with effect from 22 November 2005: who terminated and why is not pleaded. The claim is for some £11,500 of commission claw back and some £10,500 in respect of Business Benefit. The Bennett defence relates essentially to the transition from Gwent & Forest Mortgage Centre to the company.[20]AXA’s Particulars of Claim against Ideal Financial Planning Ltd (“Ideal”) plead that there was an earlier agreement between them, dated 21 May 2003, replaced by an agreement dated 31 October 2004. The later agreement was terminated with effect from 21 February 2006. AXA claims a sum of approximately £23,765, comprised of commission claw back of £4,687 and Business Benefit of £19,000. In its amended defence and counterclaim, Ideal pleads that its principal, Andrew Parry, had carried on business as an independent financial adviser between 1 December 2001 and 25 April 2003 under an Appointed Representative Agreement with Interlink Premier Network Ltd. Representations were made to Mr Parry by employees of AXA that induced him to incorporate Ideal for it to become an appointed representative of AXA. The representations alleged include a representation that Ideal would be able to operate on a multi-tie basis, enabling sales of products other than AXA’s. Implied terms imposing obligations on AXA, which it broke, are also alleged.[21]In the claim against Kymin Mortgage Services Ltd (“Kymin”), AXA claims some £66,000 under an agreement made on 12 November 2003 and terminated with effect from 24 February 2004. In its amended defence and counterclaim, Kymin alleges breaches by AXA of various oral agreements, including an agreement that it would not be a tied agent, but would enter into a multi-tie agreement so that it could sell financial products from other companies. These oral agreements are also pleaded in the alternative as false representations. AXA’s amended reply and defence to counterclaim particularises its claim, of which all but £972 is for repayment of Business Benefits pursuant to schedule 4 of the Agreement, and denies all of Kymin’s allegations.

The order for the trial of preliminary issues

[22]On various dates in 2007 HH Judge Havelock-Allan QC made agreed orders for the AXA claims against Campbell Martin, Harry Bennett and Associates Ltd, Ideal Financial Planning Ltd, Kymin Mortgage Services Ltd, and Mortgage UK Financial Services Ltd and their respective guarantors to be case managed together.[23]The order in the Campbell Martin claim identified the preliminary issues as follows:
“Issue 1 ‘Whether, on its true construction, Clause 24 (Entire Agreement) of the AXA Adviser Agreement (“the Agreement”) precludes the defendants from relying on the misrepresentations and/or breaches of warranty and/or implied terms alleged in their Amended Defences and Counterclaims.’ Issue 2 ‘Whether, on its true construction, Clause 15.2 (Exclusion of Set-Off) of the Agreement, precludes the defendants from relying on the sums counterclaimed as a defence of set-off to the claimant’s claim or as a ground for withholding payment of any monies payable to the claimant under the Agreement.’ Issue 3 ‘Whether, on its true construction, Clause 1.6 of Schedule 4 to the Agreement prevents the Court from determining the true amount of any Monies due to be paid by the defendants under the Agreement, in the absence of manifest error.’ Issue 4 ‘If the answer to Issue, 2 and or 3 is “yes”, whether the Clause is enforceable against the defendants having regard to the provisions of sections 3, 8 and 11 of the Unfair Contract Terms Act 1977.’ ”
Issue 2 Issue 3

Issue 4

[24]The order then set out the Defendants’ case “taken at its highest” and invited the Court to determine these issues on the assumption that the facts and matters alleged by the Defendants would be established at trial. I shall have to comment on some of these assumed facts, and have therefore set out the order as an annex to my judgment.[25]The orders made in the Ideal Financial, Harry Bennett and Kymin Mortgage Services proceedings specified the same preliminary issues, but, of course, different facts and matters.[26]It can be seen that Preliminary Issues 1, 2 and 3 are questions of construction, and do not require any investigation of any facts beyond those set out in the order. Whether Issue 4 is so limited depends on the requirements of UCTA, to which I shall refer below.

The judgment of HH Judge Graham Jones

[27]The judge held that on the basis of the allegations in the various orders, the answer to Issue 1 was “No”. In his judgment, he gave reasons why clause 24 did not exclude liability for misrepresentations by AXA, but did not address expressly whether or why what would otherwise be collateral warranties were excluded. This is important, because the representations specified in, for example, the Campbell Martin order were not representations of fact, but rather promises, and could only be treated as representations of fact if AXA had no intention of fulfilling those promises when it made them (if it did). That is effectively an allegation of fraudulent misrepresentation, which is not alleged and is not suggested. If those representations had any legal effect, it would have been as collateral contracts or warranties rather than representations of fact. Similarly, in the Ideal Financial order, the representations in paragraphs 6.2 to 6.5 inclusive are promises rather than representations of existing fact. Much the same applies to the so-called representations set out in the orders in the other proceedings. That the judge treated them as if they were representations of fact can be seen in paragraph 51 of his judgment, on Issue 2, which I set out below. As can be seen, once again, the allegation of collateral warranties was not referred to. The distinction between a representation of fact and a collateral warranty is important because a clause that is ineffective to exclude liability for misrepresentation may be effective to exclude what would otherwise be a collateral warranty.[28]Furthermore, the judge seems to have been influenced by facts other than those set out in the agreed orders. For example, he stressed that there was no equality of arms between the parties, and that the Agreement was in a standard form from which no deviation was permitted. These matters are clearly relevant to the application of UCTA, but I have difficulty seeing that they were relevant to the question of construction posed by Issue 1.[29]On Issue 2, the judge said: 51. On the basis of the Agreed Facts, the Defendants would not have entered into the respective Agreements and would not have suffered the losses thereby incurred but for the misrepresentations by AXA. I have held in relation to Issue 1 that the Defendants are not precluded by Clause 24 from relying on those misrepresentations. It must follow that, on the basis of the Agreed Facts, in each case the whole Agreement, including Clause 15.2 (Exclusion of Set-Off), is unenforceable. He therefore answered Issue 2 in the negative.[30]I regret that I cannot follow this reasoning. A misrepresentation, if established, does not render an agreement unenforceable. It may entitle the representee to rescind the agreement, but none of the agreed orders included rescission as an assumed fact or matter. In any event, Issue 2 concerned the construction of clause 15.2. The judge did not address or answer the question of construction.[31]The judge expressly applied similar considerations to Issue 3, which he also answered in the negative.[32]Having so answered Issues 1, 2 and 3, the judge did not address Issue 4, stating: 57. This issue does not arise since none of the Issues have been answered affirmatively.

The parties’ contentions on this appeal

[33]Perhaps not surprisingly, the parties’ contentions before us bore little resemblance to the reasoning of the judge.

Issue 1: Clause 24: the entire agreement clause

[34]The Respondents accepted that in view of the decision of this Court in Springwell Navigation Corp v J P Morgan Chase Bank [2010] EWCA Civ 1221, by which we are bound, an entire agreement clause such as clause 24 in a signed written agreement is effective in accordance with its terms. However, the Respondents reserved their right to seek to argue in the Supreme Court that Springwell was wrongly decided. All parties accepted that as a matter of the construction of clause 24 it was effective to exclude collateral warranties. The Appellant submitted that it was also effective as a matter of its true construction to exclude misrepresentations or liability for them. The Respondents submitted that it was insufficiently clear and unequivocal to exclude misrepresentations or liability for them. For the Appellant, Mr Picken QC submitted that clause 24 excluded any implied terms. Mr Spink QC, for the Defendants in the Ideal, Bennett and Mortgage UK proceedings, submitted that it did not, and his submissions were adopted by Mr McMeel on behalf of the Defendants in the Kymin proceedings.[35]The effect of clause 24 on misrepresentations is less clear than its effect on what might in its absence be collateral warranties. Since this is a question of construction, it depends on the precise words of the clause and indeed of the Agreement as a whole, and it is not necessarily helpful to rely on judgments on differently worded provisions. There is nonetheless a comparison to be made with the provisions considered by the Court of Appeal in Deepak v ICI [1999] 1 Lloyd’s L Rep 387, which was held to exclude collateral warranties but not misrepresentations, and to the clause considered by Ramsey J in BSkyB v HP Enterprise Services UK Ltd [2010] EWHC 86 (TCC). Furthermore, there are, as Mr Picken accepted, well known contractual provisions that clearly and unequivocally refer to misrepresentations.[36]I have no doubt that clause 24 does not exclude or supersede misrepresentations as to matters that are not the subject of the terms of the Agreement. Notwithstanding the words “This Agreement … constitute the entire agreement and understanding between us in relation to the subject matter thereof” and “this Agreement shall supersede any prior … representations … between you and us relating to the subject matter of this Agreement” I do not think that the clause is sufficiently clear for this purpose. Indeed, I have difficulty in seeing how a written agreement can “supersede” a representation that does not relate to the terms of the agreement. Thus I think that a representation by AXA such as “We are the largest insurance company in the country”, if false and relied upon, is not superseded by the clause.[37]In an effort to give some effect to the inclusion of the word “representations”, I initially considered that a representation that relates to the terms of the Agreement could be excluded or superseded. However, having read and been convinced by Lord Justice Rix’s compelling judgment, I have resiled from this position. In summary, in addition to the difficulty of reading “representations” as including “misrepresentations”, as Lord Justice Rix points out, such representations do not relate to “the subject matter” of the Agreement, but to the terms of the Agreement. The context too points away from the interpretation contended for by AXA.[38]It follows that clause 24 has no effect on misrepresentations of fact. I would add, however, that it seems to me that most of the statements alleged to be misrepresentations may well be, on analysis, either advice or what in the absence of clause 24 would be at best collateral warranties.[39]In the case of Campbell Martin, the implied terms referred to in the order for the trial of the preliminary issues are:8.1 AXA would process all business submitted to it by (Campbell Martin) with reasonable care and without any unreasonable delay.8.2 AXA would ensure that its computer processes operated efficiently so as to facilitate the completion of business submitted without unreasonable delay.8.3 AXA would not unreasonably delay or unreasonably refuse or fail to approve the appointment of suitable company representatives recruited by (Campbell Martin).[40]The same assumed implied terms are set out in the orders in the Harry Bennett and Ideal Financial proceedings. No implied terms are mentioned in the Kymin order.[41]None of the orders specifies the basis for the implication of the terms alleged by the Defendants. It is apparent, however, that the Defendants allege that they are to be implied in order to give business efficacy to the Agreements. In other words, the implied terms are said to be intrinsic to the Agreements, and true implications. In my judgment, such terms, if otherwise to be implied, are not excluded by clause 24. As intrinsic provisions of the Agreement, they are within the expression “This Agreement and the Schedules and documents referred to herein” in the first sentence, and they are not “prior” to the Agreement, and therefore are unaffected by the second sentence. The Agreement might have included, but does not include, an express specific exclusion of such implied terms.[42]On the other hand, terms that might be implied as a result of matters extrinsic to the written Agreements would, in my view, be excluded by clause 24.[43]It follows, in my judgment, that Issue 1 cannot be answered by a simple “Yes” or “No”, because most of the alleged representations are not representations of fact. However, the exclusion of alleged collateral warranties should be given a simple affirmative answer, and the exclusion of the alleged implied terms should be given a simple negative answer.

Issue 2: Clause 15.2: no set off

[44]Apart from UCTA, I see no basis in the assumed facts set out in the orders for the trial of the preliminary issues for clause 15.2 not to take effect in accordance with its terms: see Coca Cola Financial Corp v Finsat Ltd [1998] QB 43. Mr Spink and Mr McMeel sensibly did not contend that it does not do so.[45]There was a suggestion that a defendant could seek a stay of any judgment obtained by AXA pending determination of its counterclaim. I do not think that this is right. It would be inconsistent with clause 15.2 for the court, in the exercise of its discretion, to order such a stay: see Coca Cola Financial Corp v Finsat Ltd at 858H to 859A, Continental Illinois National Bank v Papanicolaou [1986] 2 Lloyd’s Rep 441.

Issue 3: clause 1.6 of Schedule 4: conclusive evidence

[46]Although the order for the trial of preliminary issues referred to clause 1.6, and not to clause 5.5, they have similar functions and effect. I shall refer to clause 1.6, but the issues it raises apply equally to clause 5.5.[47]Again, there was no dispute before us as to the contractual effect of clause 1.6. Such clauses have long been used: see Society of Lloyd’s v Fraser and ors (unreported, Court of Appeal 31 July 1998); see too IIG Capital v Van der Merwe [2008] EWCA Civ 542. Clause 1.6 takes effect in accordance with its terms. The answer to Issue 3 is Yes. Issue 4: UCTA and section 3 of the Misrepresentation Act 1967 (a).

(i) Clause 24

[48]It is common ground that the Agreements were on AXA’s standard terms of business, so that section 3 of UCTA applies to them. The Respondents contend that both that section and section 3 of the Misrepresentation Act 1967 apply to them. The Appellants submitted that neither provision does, since the effect of clause 24 is to exclude any effective misrepresentation or collateral warranty.[49]An entire agreement such as clause 24 is not an exemption clause of the kind with which UCTA was and is principally concerned. Since it prevents any collateral contract or warranty from coming into existence, it is not the subject of section 3(2)(a), since there is no collateral contract of which AXA could be in breach. Nor does section 13 materially assist the Respondents, for the same reason.[50]However, different considerations apply to section 3(2)(b)(i). Quite how that ‘paragraph’ should operate is not entirely clear, as is demonstrated by the somewhat tentative discussion in Chitty on Contracts, 30th edition, at paragraph 14-073. I have no doubt that it is principally aimed at the small print that entitles a party to a contract to provide something other than that defined by the principal terms of the contract, as where a holiday company reserves the right to substitute a hotel or resort for that specified in the main part of the contract. In most cases, as Chitty suggests, the performance reasonably expected of a party is that which is defined by the written contract between the parties. But this ‘paragraph’ of section 3 refers not to the performance specified in the contract but to the performance “which was reasonably expected” of that party. It seems to me that in appropriate circumstances a pre-contractual representation or promise may affect the performance that is reasonably expected of a party. It follows that clause 24 may be subject to the reasonableness test in UCTA in relation to both collateral warranties and representations. However, section 3(2)(b)(i) will only come into play in the present cases if it is possible to identify both the performance by AXA that was reasonably expected and that defined by the contract. The effect of clause 24, if any, on a representation such as “We are the largest insurance company in England” will not be within the scope of section 3(2)(b)(i).[51]Mr Picken submitted that, since the effect of clause 24 is that the parties agree that there have been no misrepresentations, section 3 of the Misrepresentation Act cannot apply to it. While I see the logic of his submission, to my mind his approach to section 3 is too formalistic. Looked at sensibly and practically, if, contrary to my view, clause 24 has the effect for which he contends, it excludes AXA’s liability for misrepresentations it made, and would be subject to the statutory requirement of reasonableness in this respect too. (ii). Clause 15.2[52]In Stewart Gill Ltd v Horatio Myer & Co Ltd [1992] 1 QB 600 the Court of Appeal held that a provision materially identical to clause 15.2 was within the scope of section 3 of UCTA as extended by section 13. That decision is binding on us, even if I disagreed with it, which I do not. The clause is valid only to the extent that it is reasonable. (iii). Clause 1.6 of Schedule 4: conclusive evidence[53]It is common ground that clause 1.6 of Schedule 4 is subject to the requirement of reasonableness in UCTA. In my judgment, this is correct. Clause 1.6 does have the effect of excluding the Defendants’ right of set off, which, if it is an equitable set off, goes to reduce the sum due from them to AXA.

Have AXA satisfied the requirement of reasonableness?

[54]The position of the parties in relation to this issue changed during the course of the hearing. Initially, all counsel asked the Court to decide this issue notwithstanding the lack of any decision by the judge and the lack of relevant findings of fact. However, during the course of the hearing, concerns were expressed, not least by myself, that the Court was being asked a hypothetical question, on incomplete or non-existent factual findings. This led Mr Spink QC to reconsider his position, and ultimately to submit that the Court should not address this issue. In the end, the Court decided to hear full submissions, with a view to then deciding whether or not it should address and answer this issue.[55]I fully understand and sympathise with the desire of the parties to obtain even a qualified or provisional answer on this issue. The sums involved in this litigation are not great, and anything that will assist the parties to resolve their differences without incurring the costs of a full trial is to be supported.[56]Whether the requirement of reasonableness is satisfied depends not only on the terms of the contract and the contractual provision in question, but also on “the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made”. Section 11 of UCTA expressly requires the Court to have regard to such circumstances, as Mr McMeel pointed out. The Act requires the Court to have regard in particular to the matters set out in Schedule 2. They are:(a) the strength of the bargaining positions of the parties relative to each other, taking into account (among other things) alternative means by which the customer's requirements could have been met;(b) whether the customer received an inducement to agree to the term, or in accepting it had an opportunity of entering into a similar contract with other persons, but without having to accept a similar term;(c) whether the customer knew or ought reasonably to have known of the existence and extent of the term (having regard, among other things, to any custom of the trade and any previous course of dealing between the parties); … Paragraphs (d) and (e) are inapplicable to the present claims.[57]The Defendants pointed out that AXA had failed to plead the facts and matters it relied upon for its case that the terms in issue were reasonable. Indubitably, AXA should have done so, but it seems that no objection was made to the evidence being adduced by AXA below, and it is now too late for the Defendants to take this pleading point. Nonetheless, the lack of proper pleading, by either AXA or by the Defendants, has I think resulted in a lack of appropriate analysis.[58]The only evidence before the judge, apart from the matters set out in the agreed orders for the trial of the preliminary issues, was given by Sean McKillop, an employee of AXA. Relatively little of his cross-examination addressed the issues that require to be addressed under UCTA.[59]In my judgment, the starting point in the consideration of the question of reasonableness is that the Agreements were made between commercial organisations and in a commercial context. Admittedly, AXA was an immeasurably larger organisation than the companies with which it contracted, and the guarantors of the companies’ liabilities were, I assume, persons of modest means. However, as financial advisors, they were accustomed to deal with written agreements, such as insurance and pension policies, and I think it fair to assume that they would generally, if not always, advise their clients to ensure that they were content with the written terms of their policies. I would therefore have expected the Defendants to have read the Agreements, and in the case of the individual Defendants the guarantees that they signed. The Agreements state both on the front page and in the very first clause 1.1 that they set out the terms of the company Defendants’ appointment as AXA’s Appointed Representative. The contents page lists in capital letters clause 15 entitled “Set Off”, and clause 24, entitled “Entire Agreement”. Clause 1, which I would expect a Defendant to read first, makes it clear in clauses 1.8 and 1.9 that there are restrictions on the right to sell products other than AXA’s, as does clause 2.1.[60]None of the Defendants gave evidence that they had not read or had not had an adequate opportunity to read the Agreement into which he entered, or which he signed on behalf of a company. Nor was it suggested to Mr McKillop that they had had no such opportunity (though it may well be that he would have been unable to give any evidence on the point). The contractual provisions in issue are not unusual in the insurance industry: the evidence before the judge was that they are standard terms. Two of the company Defendants, Ideal Financial Planning and Harry Bennett, had entered into previous agreements with AXA on materially identical terms.[61]In these circumstances, I consider that the Defendants “knew or ought reasonably to have known of the existence and extent” of the terms in question.[62]If it be right that other insurance companies required their representatives to enter into similar contracts, it cannot be said that the Defendants had “an opportunity of entering into a similar contract with other persons, but without having to accept a similar term”. However, they could have carried on business, or continued to carry on business, as independent financial advisers. If they had done so, they would have had to be authorised as IFAs by the FSA, whereas as a result of entering into the Agreements their authorisation and their regulation became the responsibility, and a cost, of AXA. To have been directly authorised by the FSA would have involved work and expense, as Mr McKillop said in evidence, but the approximate sums involved, or indeed the procedures involved, were not in evidence. I can assume that the cost and work involved in being a wholly independent financial adviser are not so great as to make it an impracticable alternative to regulation through an insurance company, since if they were there would be no independent financial advisers. Clearly avoiding the costs involved in direct authorisation is an incentive to regulation as an appointed representative of, and through, an insurance company, and to this extent the Defendants could have avoided terms such as those now in issue.[63]The purpose of entire agreement clauses such as clause 24 is obvious. It was accurately described by Lightman J in Inntrepreneur Pub Co v East Crown Ltd [2000] 2 Lloyd’s L Rep 611: 7. The purpose of an entire agreement clause is to preclude a party to a written agreement from threshing through the undergrowth and finding in the course of negotiations some (chance) remark or statement (often long forgotten or difficult to recall or explain) on which to found a claim such as the present to the existence of a collateral warranty. The entire agreement clause obviates the occasion for any such search and the peril to the contracting parties posed by the need which may arise in its absence to conduct such a search. For such a clause constitutes a binding agreement between the parties that the full contractual terms are to be found in the document containing the clause and not elsewhere, and that accordingly any promises or assurances made in the course of the negotiations (which in the absence of such a clause might have effect as a collateral warranty) shall have no contractual force, save insofar as they are reflected and given effect in that document. The operation of the clause is not to render evidence of the collateral warranty inadmissible in evidence as is suggested in Chitty on Contract 28th ed. Vol 1 para 12-102: it is to denude what would otherwise constitute a collateral warranty of legal effect.[64]A clause such as clause 24 gives both sides certainty as to the terms of their contract. In circumstances in which the sums involved in any dispute are likely to be relatively modest, if unchallenged it has the effect of limiting the costs involved in litigation; indeed, it may result in litigation being avoided. It is nonetheless more beneficial to AXA than to the Defendants, since it is AXA who decided on the terms of the Agreement.[65]The effect of clause 24 is limited to collateral warranties. I consider that sensible parties, faced with a written agreement of the length and detail of the Agreements, would not expect it to be attended by oral collateral agreements, and would expect their contract to be contained in the document they sign. Furthermore, if the Appointed Representative is dissatisfied, it may at any time terminate the Agreement under clause 13.3 on 2 months’ notice. This is a relatively short notice period. Thus the Appointed Representative is not tied in to the Agreement for an extensive period.[66]Weighing up all these considerations, I have concluded that clause 24 was a reasonable provision to have been included in the Agreements.[67]In relation to clause 15.2, in my judgment in considering whether it is a reasonable provision it is necessary to consider what were the claims that when entering into the Agreements the parties would have envisaged as falling within “All monies payable by you to us under this Agreement” and what “credit, set-off or counterclaim” they would or should have envisaged as being available to the Defendants. The former would be clawbacks of commission, due from the Defendants as a result of cancellation or termination of insurance policies by their clients, and moneys repayable under Schedule 4.[68]Schedule 4 concerned the financial and other assistance provided by AXA to the Defendants under the Agreements. In the case of Campbell Martin, for example, AXA provided a “Business Benefits Allowance” of £43,032 and an “Initial Development Allowance” of £77,000, plus a number of computers and printers. Paragraph 1.1.3 of Schedule 4 required the Development Allowance to be used for the purpose of developing the business carried on by the Defendants pursuant to their Agreement: an unspecific obligation. Paragraph 1.1.4 was even less specific in relation to the Business Benefits Allowance, providing only that it was provided by AXA “on the terms from time to time applicable to the Business Benefit in question a copy of which will be supplied on request”. Those terms are not in evidence. The total of the Development Allowance and the Business Benefits Allowance was referred to as “the Aggregate Benefits”.[69]Schedule 4 also specified Annual Commission Targets and a “Five Year Commission Target”. The total of the Annual Commission Targets was the Five Year Commission Target of £1,763,720. Each of these figures seems to be a calculated figure: for example, the Year 3 Commission Target is £367,224. There is no evidence or information before the Court as to how or on what basis these Commission Targets were arrived at and agreed. They are not the same in the Agreements in issue in these appeals, but were specific to and different in each Agreement. If I have to make any assumption, given that the Agreements must be construed as a whole and the orders for the trial of the preliminary issues do not include any assumption that the figures were arrived at on any basis inconsistent with the other provisions of the Agreements, I would assume that the parties agreed that on a single-tie basis these Commission Targets were reasonably achievable.[70]Schedule 4 provides for a calculated proportion of the Aggregate Benefits to become repayable in the event that the Appointed Representative’s Cumulative Commission Earnings for any year are less than the specified Cumulative Commission Target for that year.[71]Clause13.1 of each Agreement provides for a contractual duration of 5 years, but that is a maximum duration, since under clauses13.2 and13.3 either party may terminate the Agreement at any time on giving 2 months’ notice. If either party does terminate the Agreement during the 5 year period, a calculated proportion of the Aggregate Benefits will be repayable by the Appointed Representative if its Cumulative Commission Earnings are less than the Five Year Commission Target. In effect, as I understand the Agreement, in such circumstances the Aggregate Benefits are treated as if they would have been amortised over the 5 year period, so that premature termination results in the unamortised Benefits being repayable.[72]We had no submissions on the meaning or effect of clauses 5.5 of the Agreement and clause 1.6 of Schedule 4. However, the expression “manifest error” in the present context is not as unambiguous as might at first seem. “Manifest” may mean “apparent on the face of the document”, as where the document is a certificate under clause 1.6 of Schedule 4. If so, it may be difficult to see how any error could be manifest in that sense. I think, therefore, that “manifest” in this context has the wider meaning of “obvious”.[73]I would expect the Appointed Representative to be able to keep track of the commission payable on policies and other financial products it sold pursuant to the Agreement, and on commission clawbacks resulting from its clients cancelling or terminating policies. If so, it would have no difficulty in itself calculating its Commission Earnings, and from that in making the calculations set out in Schedule 4. It should therefore be able to demonstrate that any statement or certificate signed by AXA for the purposes of clause 1.6 of that Schedule, if incorrect, is subject to a manifest error. In my view, therefore, clause 1.6 is a reasonable provision for the purposes of UCTA.[74]For similar reasons I consider clause 5.5 to be reasonable. A failure of AXA to pay commission on a policy taken out by a client of an Appointed Representative which it has brought about will be an obvious, and therefore manifest, error on the part of AXA. Any incorrect calculation of commission will similarly be challengeable as subject to such error: any such calculation will be obviously wrong.[75]Very different considerations apply to clause 15.2. It is signposted in the list of contents, under the heading “Set Off”, so that it should be obvious to the Appointed Representative that there is a contractual provision affecting rights of set off. Clause 15.1 expressly authorises AXA to set off any liability of the Appointed Representative against sums payable to it. Clause 15.2, on the other hand, would prevent the Appointed Representative who is owed commission from being able to set off what it is owed against its liability under Schedule 4, and also prevent the Appointed Representative from being able to set off his claim for damages for factual misrepresentation. We have no explanation of AXA’s requirement for this clause. In the absence of such an explanation, I would hold that it has not shown that the clause is reasonable for the purposes of UCTA.

Lord Justice Wilson:

[76]My Lords have now reached full consensus, to which, in the absence in my view of any need for explanation of my own, I am happy also to subscribe.

Lord Justice Rix:

[77]I am grateful to Stanley Burnton LJ for setting out the material in this appeal. I agree with his conclusions. I have written a separate judgment principally to explain my reasons for considering that clause 24 does not exclude liability for misrepresentations of any kind, an issue on which there has been some debate; also to say something about Curtis v. Chemical and Dyeing Co [1951] 1 KB 801 (CA) on which Judge Graham relied; and because we are disagreeing with the reasoning of the judge.

Issue 1: the effect of clause 24

[78]Clause 24, entitled “Entire Agreement”, of each of the respondent parties’ Adviser Appointment Agreements (collectively, the “contract”), provides as follows. I have broken the clause up, for convenience of exposition, into four parts, numbered (i) to (iv), numbering which I have inserted and which does not appear in the original:
“(i) This Agreement and the Schedules and documents referred to herein constitute the entire agreement and understanding between you and us in relation to the subject matter thereof. (ii) Without prejudice to any variation as provided in clause 1.1, (iii) this Agreement shall supersede any prior promises, agreements, representations, undertakings or implications whether made orally or in writing between you and us relating to the subject matter of this Agreement (iv) but this will not affect any obligations in any such prior agreement which are expressed to continue after termination.”
[79]The critical part which is relied on by the appellant, AXA Sun Life Services Plc (“AXA”), is part (iii). It will be observed that part(i) is a straightforward statement in conventional terms that the contract is the entire agreement between the parties; that part(ii) is a carve-out in favour of any existing formal agreement between the parties, but stating that the contract operates as a variation of that agreement (it is not necessary to consider how that carve-out operates differently from the effect of clause 24 on its own terms); and that part (iv) is a carve-out in favour of prior agreements which are expressed to continue after termination of the contract. Thus parts (i), (ii) and (iv) are all concerned with identifying the parties’ contractual arrangements.[80]AXA submits, however, that in addition part (iii) operates to eliminate and/or to exclude liability for misrepresentations, either altogether, or at least so far as concerns misrepresentations as to the terms of the contract. Given that the clause as a whole is concerned with agreements rather than misrepresentations, and that the word “misrepresentations” does not appear in it, this is not to my mind fertile ground for AXA’s submission. Nevertheless, the word “representations” does appear, albeit it will be seen that it is completely sandwiched between words of contractual import, namely prior “promises, agreements…undertakings or implications”. It will also be observed that part (iii) does not in terms state either that no representations have been made, or that no reliance has been placed on any representations, or that liability for (mis)representations is excluded: each of which is a traditional way in which potential liability for misrepresentations has been sought to be avoided.[81]In these circumstances, I would be inclined, subject to authority, to regard clause 24 as being concerned only with matters of agreement, and not with misrepresentation at all. The essence of agreement is that it is concerned with matters which the parties have agreed. The essence of misrepresentation, however, is that it is not concerned with what the parties have agreed, but rather with inaccurate statements (innocently, negligently or fraudulently inaccurate statements) which have been made by one party to the other, have been relied on by the representee in entering into their agreement, and which may give the representee rights to rescind that agreement and/or claim tortious or quasi-tortious damages by reason of loss arising out of entering into the agreement. In a clause therefore in which three parts are plainly concerned only with agreement, including two other parts of the self-same sentence, and in which all the other sibling words in the critical part (iii) are words of agreement, and where the critical single word “representations” (not misrepresentations) is likely in context to refer to representations which might be argued, but for the clause, to have become terms of the agreement, and where the other important word “supersede” is essentially a word of agreement rather than exclusion, I would thus provisionally conclude that misrepresentation and the exclusion of misrepresentation or liability for it are simply not the business of the clause at all.[82]It may also be noted that the immediately preceding clause, clause 23, is concerned with the “Severability” of “any provision of this Agreement”, and that the immediately following clause, clause 25, is concerned with “Variations”, requiring writing to effect any “amendment or variation” of the contract. Thus the surrounding clauses are concerned with matters of contractual agreement. Further, clause 22, which is headed “Joint and Several Liability” states:
“22.1 all representations, warranties, undertakings, covenants, agreements and obligations made, given or entered into in this Agreement…shall be deemed made, given or entered into jointly and severally…”
There again, as it seems to me, “representations” must be intended as a word of contractual obligation.[83]Is there anything in jurisprudence which gives guidance in this area? A number of authorities were relied on by the parties.[84]In Alman and Benson v. Associated Newspapers Group Ltd (20 June 1980, unreported, Browne-Wilkinson J) the clause referred to “the entire agreement and understanding”, but this was held not to exclude liability for misrepresentation. Browne-Wilkinson J said that “understanding” referred to something bilateral and operated to exclude collateral warranties, but that to exclude liability for misrepresentation something further was required such as a term “acknowledging that the parties had not relied on any representations in entering into the contract”.[85]In Thomas Witter Ltd v. TBP Industries Ltd [1996] 2 All ER 573, Jacob J held that a clause which acknowledged that a party had not been induced to enter into an agreement by any other than scheduled representations did not exclude liability for unscheduled misrepresentations. Jacob J said (at 596):
“if a clause is to have the effect of excluding or reducing remedies for damaging untrue statements then the party seeking that protection cannot be mealy-mouthed in his clause. He must bring it home that he is limiting liability for falsehoods he may have told.”
[86]That observation was relied on in Deepak Fertilisers and Petrochemicals Corporation v. ICI Chemicals and Polymers Ltd [1998] 2 Lloyd’s Rep 139 (“Deepak v. ICI”), which concerned an entire agreement clause which mentioned neither representations nor misrepresentations and provided “there are not any agreements, oral or written, expressed or implied, concerning the subject matter which are not merged into this CONTRACT and superseded hereby”. I referred to Alman and Benson and Thomas Witter and concluded there that that clause excluded liability for collateral warranties but not misrepresentations (at 168). This court upheld that construction, rejecting a submission that it was “highly technical to draw a distinction between misrepresentations and collateral warranties based on the selfsame representations” (Deepak v. ICI [1999] 1 Lloyd’s Rep 387 at para 34).[87]In Inntrepreneur Pub Co v. East Crown Ltd [2000] 2 Lloyd’s Rep 611 at 614 Lightman J considered an entire agreement clause in its stripped down form (simply “this Agreement…constitutes the entire Agreement between the parties”). First, he expressed the purpose of such a clause in these terms:
“The purpose of an entire agreement clause is to preclude a party to a written agreement threshing the undergrowth amd finding in the course of negotiations some (chance) remark or statement (often long forgotten or difficult to recall or explain) on which to found a claim such as the present to the existence of a collateral warranty…For such a clause constitutes a binding agreement between the parties that the full contractual terms are to be found in the document containing the clause and not elsewhere.”
[88]Next he distinguished between collateral warranties and misrepresentations in the following remarks:
“An entire agreement provision does not preclude a claim in misrepresentation, for the denial of contractual force to a statement cannot affect the status of the statement as a misrepresentation. The same clause in an agreement may contain both an entire agreement provision and a further provision designed to exclude liability for misrepresentation and breach of duty.”
[89]In Man Nutzfahrzeuge AG v. Freightliner Ltd [2005] EWHC 2347 Moore-Bick J considered a complex clause which not only said that “There are no representations, warranties, covenants, conditions or other agreements, express or implied, collateral, statutory, statutory or otherwise” (which if the clause had ended there I would have regarded as dealing with only contractual obligations), but continued so as to deny reliance on “any other information, discussion or understanding in entering into and completing the transactions” and at the same time carved out from the clause “any Party’s liability for fraud or fraudulent misrepresentation”. In that context, it comes as no surprise that he concluded (at [127-128]) that although there was an exclusion of all other grounds of complaint, there was none for fraud.[90]In Trident Turboprop (Dublin) Limited v. First Flight Couriers Limited [2008] EWHC 1686 (Comm), [2008] 2 Lloyd’s Rep 581 Aikens J considered a clause which stated “the Lessor has not and shall not be deemed to have made any warranties or representations, express or implied, about the Aircraft…”. He concluded that such a provision could be relied upon to defeat a defence in misrepresentation, for the parties had agreed that the absence of representations was the basis of their transaction (at [36]). In that context the word “representations” sufficed. However, a separate clause also went on expressly to exclude “any rights…regarding any warranty or representation, except in respect of any warranty or representation expressly made in this Agreement…” (at [37]).[91]In BSkyB Ltd v. HP Enterprise Services UK Ltd [2010] EWHC 86 (TCC) the entire agreement clause said that the agreement and its schedules “constitute the whole agreement between the parties in relation to the subject matter and supersede any previous discussions, correspondence, representations and agreement between the parties with respect thereto…” (at [359]). Ramsey J considered the jurisprudence set out above and concluded that the clause in his case did not exclude liability for non-fraudulent misrepresentation. The essence of his reasoning is contained in the following passages:
“[382] Those words do not, in my judgment, amount to an agreement that representations are withdrawn, overridden or of no legal effect so far as any liability for misrepresentation may be concerned. It provides that the Agreement represents the entire understanding and constitutes the whole agreement. It is in that context that the Agreement supersedes any previous representations. That is, representations are superseded and do not become terms of the Agreement unless they are included in the Agreement. If it had intended to withdraw representations for all purposes then the language would, in my judgment, have had to go further… [385] In this case the statement that the Agreement superseded any previous discussions, correspondence, representations or agreement between the parties with respect to the subject matter of the agreement prevented other terms of the agreement or collateral agreement from having contractual effect. It did not supersede those matters so far as there might be any liability for misrepresentation based on them… [387] Secondly, while there is a reference to representations, there is nothing in the clause that indicates that it is intended to take away a right to rely on misrepresentations…I consider that clear words are needed to exclude a liability for negligent misrepresentation and that this clause does not include any such wording.”
[92]In my judgment, Ramsey J’s analysis cited above is sound. He considered the jurisprudence as a whole in respect of a clause which has many similarities with our own clause 24. In context the language of “representations” and “supersede” is the language of defining contractual obligations rather than the language of excluding liability in misrepresentation. There was there, as here, no language to the effect that the parties were agreed that no representations had been made or relied upon.[93]Finally, in Springwell Navigation Corporation v. JP Morgan Chase Bank [2010] EWCA Civ 1221 this court confirmed its decision in Peekay Intermark Ltd v. ANZ Banking Group Ltd [2006] EWCA 1551, [2006] 2 Lloyd’s Rep 511, that a clause acknowledging the making of no representations is an effective exclusion of any liability in misrepresentation and that the Lowe v. Lombank [1960] 1 WLR 196 (CA) analysis in terms of estoppel rather than contract does not require otherwise. The respondents here accept that they are bound by Springwell in this court, but reserve their position at Supreme Court level.[94]In my judgment, this jurisprudence confirms my provisional conclusion on the wording of clause 24. No doubt all such cases are only authority for each clause’s particular wording: nevertheless it seems to me that there are certain themes which deserve recognition. Among them is that the exclusion of liability for misrepresentation has to be clearly stated. It can be done by clauses which state the parties’ agreement that there have been no representations made; or that there has been no reliance on any representations; or by an express exclusion of liability for misrepresentation. However, save in such contexts, and particularly where the word “representations” takes its place alongside other words expressive of contractual obligation, talk of the parties’ contract superseding such prior agreement will not by itself absolve a party of misrepresentation where its ingredients can be proved.[95]I would therefore conclude that clause 24 does not exclude liability for misrepresentations of any kind. I see no reason to distinguish between misrepresentations which do or do not relate to the terms of the contract. I am not sure I know the difference between them. Of course, I can see that in an obvious case, for instance “There is no exclusion clause of any kind in my contract terms”, such a representation could be said to relate to the terms of an agreement. However, almost any representation which, if relied upon, alters the risk profile of an agreement, might be said in some sense or other to relate to the terms of an agreement.[96]In this context, I do not regard the clause 24 language of “relating to the subject matter of this Agreement” to be of much if any assistance. That is not the same as “relating to the terms of this Agreement”. It appears to be boiler-plate wording. Plainly a representation which has nothing to do the parties’ agreement at all (such as a misrepresentation about the weather) is neither here nor there.[97]In sum, on issue 1, collateral warranties are excluded; implied terms are not excluded; and I consider that misrepresentation as a whole is not excluded.[98]There is force in Stanley Burnton LJ’s view that many of the pleaded misrepresentations look like promises, i.e. collateral warranties. However, I do not think that we should purport to decide such matters on this preliminary issue.

Curtis v. Chemical and Dyeing Co

[99]In his judgment below, Judge Graham concluded, relying it seems in large part on Curtis v. Chemical and Dyeing Co [1951] 1 KB 805 (CA), that, since clause 24 did not exclude liability for misrepresentations, and because at least some of the pleaded misrepresentations were as to the “nature and effect” of the contract as a whole, therefore the whole of the contract was ineffective. None of the parties sought to uphold that latter aspect of his judgment. However, Mr McMeel submitted that the rule in the Curtis case was a special rule which prevented reliance on any exclusion clause in a contract to the extent that a representation misrepresented the nature of the contract itself. He sought, as I understood it, to rely on such an argument as going beyond one of pure construction of clause 24 itself.[100]Although, under great pressure of time, Mr McMeel did not have the opportunity to develop his submissions in detail in the way in which he would have wanted to do, and therefore I would regard what follows as not only obiter but subject also to the weakness of not being based on full argument, it seems to me important to remark that the Curtis case may have been misunderstood. It is cited for instance in Chitty on Contracts, 30th ed, 2008, at para 14-132 for the proposition that a misrepresentation as to the effect of an exemption clause inserted by the representor into his contract will prevent the representor from relying on that clause: but I am inclined to think that that is not correct.[101]In the Curtis case the plaintiff took her sequined dress to the defendant’s shop to be cleaned. She was asked to sign a receipt and queried why that was necessary. She was told that it contained a clause exempting the defendant from liability for damage to the sequins. In fact, the clause exempted the defendant from all liability. When the dress was returned, there was no problem with the sequins, but the dress was stained. The plaintiff claimed damages, and the defendant sought to rely on the clause. The county court judge said that the defendant could not rely on its clause by reason of its misrepresentation as to its character. On appeal, the plaintiff’s success was upheld, but the reasoning differed, both from that of the county court judge and between the judges in this court.[102]Denning LJ’s judgment is possibly that for which the case is known, and cited in Chitty: but in my respectful opinion he was there in the minority so far as his reasoning was concerned. He appears to have considered(a) that the exemption clause could not be relied on because it had been misrepresented; but that(b) if the damage had been to the sequins, the clause could have been relied upon; and(c) thus the representation had itself become a term of the contract; even though(d) it was not sufficiently precise and unambiguous to create an estoppel.[103]Thus Denning LJ said this (at 809/810):
“In those circumstances, by failing to draw attention to the width of the exemption clause, the assistant created the false impression that the exemption only related to the beads and sequins, and that it did not extend to the material of which the dress was made. It was done perfectly innocently, but nevertheless a false impression was created. It was probably not sufficiently precise and unambiguous to create an estoppel: Low v. Bouverie [1891] 1 KB 442; but nevertheless it was a sufficient misrepresentation to disentitle the cleaners from relying on the exemption, except in regard to beads and sequins… …In my opinion when the signature to a condition, purporting to exempt a person from his common-law liabilities, is obtained by an innocent misrepresentation, the party who has made that misrepresentation is disentitled to rely on the exemption. Whether you call that a rule of law or equity does not matter in these days. We have got too far beyond 1873 to trouble about distinctions of that kind.”
[104]That reasoning presents considerable difficulties, however. If the representation was insufficiently clear to count as an estoppel (sc a promissory estoppel), it is not clear how it could create a term. If, however, the representation could have counted as an estoppel, then there would have been no difficulty with the reasoning, for it would come as no surprise that a party could not rely on an exemption which it had promised to the other party only operated in a certain way. And since the representation relating to sequin damage would have been sufficiently clear, it could also have counted perhaps as an agreement for which there would have been consideration. If, however, the representation was not sufficiently unambiguous, it is not clear how it could have any effect as against the signed receipt.[105]The solution in my judgment is to be found in the judgments of the majority. Somervell LJ was the first to give judgment (the judgments were extempore in a case where the respondent was not called upon). The critical part of his reasoning is at 808:
“That, I think, plainly is a misrepresentation…In those circumstances, I think, owing to that misrepresentation, this exception never became part of the contract between the parties.”
Singleton LJ simply said “I agree” (and Denning LJ was third to give judgment). Thus Singleton LJ was agreeing with Somervell LJ. It follows that the majority were not involved in Denning LJ’s reasoning. Moreover, it seems to me that the majority’s reasoning is understandable. An oral contract is made for the cleaning of the dress. The receipt is only advanced when the dress has already been accepted for cleaning. The receipt is an attempt to vary the common law consequences of the cleaning contract. If nothing at all had been said, and the receipt had not been signed, it might have been said that the receipt’s exemption, never having been brought sufficiently to the plaintiff’s attention, had never become part of the contract. As it is, the receipt had to be signed: and the rule in L’Estrange v. Graucob [1934] 2 KB 394 was invoked. Where, however, the effect of the receipt was misrepresented, it was not difficult to say that its exemption clause had not been incorporated into the contract.

Issue 4

[106]For the reasons outlined in Stanley Burnton LJ’s judgment, the case management of issue 4 was left in an undesirable state, and in the end Judge Graham Jones did not even make findings on it, wrongly considering that it was unnecessary to do so. On appeal, the parties have been equivocal about how this court should deal with it. On the one hand, they have pressed us to assist them in their dispute by resolving it as best we can. On the other hand, in the course of submissions, they have had their attention drawn to possible lacunae in the evidence which have made them nervous about the possibilities of improving their position second time round. This has caused grave difficulties for this court: but, on balance, I agree that it would be a disaster for these parties to be left up in the air on this important matter, with the prospect of another preliminary trial and a further trip to this court at some time in the future. Nor is there any unfairness in our disposing of this issue. For better or worse, the parties entered upon this issue as part of their preliminary trial. The observations of Lord Donaldson of Lymington MR in Stewart Gill Ltd v. Horatio Myer & Co Ltd [1992] 1 QB 600 at 604 E/H are relevant here.[107]Since there is no exclusion of liability for misrepresentation, we are not concerned with section 3 of the Misrepresentation Act, but only with UCTA.[108]I agree with Stanley Burnton LJ as to his conclusions on this issue. As for clause 24, an entire agreement clause excluding collateral warranties is a common and business-like clause for parties making a carefully worked up agreement of this kind. It was well sign-posted. I regard the shortness of the 2 months’ notice period as of particular importance in this regard. I also agree that the conclusive evidence clauses, clause 5.5 and para 1.6 of the Schedule, are reasonable, given the exception for manifest error. If there has been an error, the Defendants ought to be able to show that it is an obvious one. If they cannot, it is fair that disputes between the parties are limited. If there still remains a dispute as to whether an error is manifest or not, the court would resolve it. As for the no set-off clause, clause 15.2, my mind has wavered: provisions of this kind are common in business, and it does not affect the substance of obligations, but only which party has to take the initiative of pursuing litigation on a cross-claim. However, I am content to agree that clause 15.2 does not pass the test of reasonableness for two reasons: it is not mutual, and Stewart Gill v. Myer would seem to support such a conclusion.

Cited in 34 later judgments

and 25 more of the most senior