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Henry Boot, (HB), opened a new Motorway Service Area (MSA) at junction 11 of the M20 called “Stop 24”. They commissioned a firm of planners and development economists called Roger Tym & Partners to produce a report on the anticipated visitor numbers for the site. Roger Tym & Partners estimated that there would be a passing daily traffic flow of 37,000 vehicles in 1999 increasing to 46,000 by 2010; a turn in rate of 15 per cent and an average occupancy of 1.96 persons per vehicle. On this basis they estimated visitor numbers at 4.67 million per year increasing to 5.5 million by 2010. They had produced a similar report in 1996, and the figures in the later report were in line with the original predictions. HB’s MSA was only 2 junctions away from Eurotunnel.

HB used the figures in the report and produced marketing material for prospective tenants, which predicted 88,000 visitors a week. The actual visitor numbers proved to be only a 10th of what had been anticipated. The claimants were all tenants which had entered into lease agreements with HB. Some of them did not complete the leases, whilst others took occupation and gave up. They all claimed that they had been induced to enter into the leases because of HB’s misrepresentations about the estimated visitor numbers, the extent of the motorway signage which would be provided and the facilities which the site would offer. They alleged that these misrepresentations had been made fraudulently, or, alternatively, that they had been made without reasonable grounds for believing that they were true.

At the heart of the tenants’ complaint is the fact that Henry Boot described the facility as a “Motorway Service Area” or MSA. The procurement of MSAs passed to the private sector in 1992 with the Department of Transport controlling the activities at an MSA through the making of a Traffic Signs Agreement (“TSA”). An operator of an MSA does not have the legal right to erect signs on the highway, but must obtain the Secretary of State’s consent. Under a TSA the Secretary of State agrees to erect signs on the motorway giving warning to motorists of the existence of the MSA and directional signs at the appropriate junction or slip road using blue signs. There was a change in 1998 when the government said it would not Government would not approve and would not allow signing from the motorway to any MSA which, in addition to the compulsory MSA facilities provided anything beyond a lodge which might provide overnight accommodation and a meeting room for up to fifteen people, but not a bar, restaurants, function rooms or more extensive conference facilities, a shop or shops catering for those using the motorway and with a total floor area not exceeding 5,000 sq ft or a modest games area not exceeding 1,000 sq ft. The Highways Agency refused permission for the blue signs to have “Stop 24” on them, but, instead should say “Port Early Arrivals and Services” and not that it was a Motorway Services Area. . The signs included symbols for the services provided.

The marketing brochures for the site produce by HB included a disclaimer of liability stating that the particulars in the brochure did not form part of an offer or contract, and that each lessee must satisfy itself as to the correctness of the statements and particulars.

The claimants’ leases stated that:

“The Tenant acknowledges that it is entering into this Agreement on the basis of the terms hereof and not in reliance upon any representation or warranty whatsoever whether written or oral expressed or implied made by or on behalf of, [Henry Boot] (save for written replies given by, [Henry Boot’s] solicitors to the enquiries raised by the Tenant’s solicitors) and the documents produced to the tenant’s solicitors prior to the date of this agreement.”

CONTRACTUAL ESTOPPEL

In the court’s view this clause had two components: an entire agreement clause and a non-reliance clause. The purpose of the entire agreement element was to remove what would have been a legally effective collateral warranty. The non-reliance element operated to exclude liability for innocent or negligent misrepresentations, but not fraudulent misrepresentations. In the case of a contractual estoppel the party relying on the clause does not need to prove that he believed the truth of the acknowledgment of non-reliance.

TEST OF REASONABLENESS

The judge concluded that the clause satisfied the test of reasonableness in s.11(1) of the Unfair Contract Terms Act 1977 because there had been no substantial imbalance of bargaining power between the parties. Each of the claimants was a substantial commercial enterprise, and each had been advised by solicitors. The term in question had been open to negotiation. More importantly, the clause expressly permitted reliance on any reply given by the Henry Boot’s solicitors to the tenant’s solicitors so that if something important had been stated in the course of negotiations and the prospective tenant wished to rely upon it, its solicitors had only to ask Henry Boot’s solicitors for an answer to a question. The consequence of all this was that the claimants could only succeed against HB if they could prove that there had been fraudulent misrepresentation.

FRAUDULENT MISREPRESENTATION

The claimants relied upon the claims made by the brochures that the development would be an MSA and the level of expected visitors. The claimants maintained that by providing the brochures HB impliedly represented that it had no knowledge or information which might call into question the accuracy and reliability of the representations made in the brochures. In addition, HB had represented that, as far as it was aware, there had been no breaches of any terms of its agreement with the Highways Agency or disputes or complaints in relation to the development, and that these were continuing representations.

It was well settled that representations made in the course of negotiations may be treated as continuing representations. In the court’s view, none of the representations had been false when they were made. The mere description of the site as an MSA did not carry with it an implicit representation about the amount and nature of the signage. HB had believed in the visitor levels as predicted in the report by Roger Tym & Partners, and had been reasonable to believe it because the report had been prepared by an apparently competent professional. Its continued honest belief in the report’s content was not a fraudulent misrepresentation.

HB had also believed that there would be a tourist information centre and travel booking service because the section 106 agreement required the local authority to provide one. HB had had no reason to suppose that the authority would not take up this entitlement.

DUTY TO CORRECT

A duty to correct only arose if HB had known that its previous representations had become false, or if HB did not care that they had. The two matters which the tenants submitted should have given rise to a duty to correct were the receipt by Henry Boot of the Dover Harbour Board’s Mr. Fawcus’ questioning of the content of the Roger Tym & Partners report and the statement by the Highways Agency that the development would not be signed as a MSA. The judge concluded that no duty to correct would have arisen unless Henry Boot knew that it no longer had reasonable grounds for so regarding the report; or did not care whether it continued to have reasonable grounds for so regarding it. This was not the same question as asking whether, objectively, Henry Boot continued to have reasonable grounds for continuing to regard the Roger Tym & Partners report as reliable. It had not crossed the mind of HB that their continued reliance on the Roger Tym & Partners report was unreasonable. On the contrary, they continued to believe (rightly or wrongly) that it was reasonable to continue to rely on that report. Consequently, no duty to correct arose.

(Foodco. UK LLP (T/A Muffin Break), Caskade Caterers Limited (T/A KFC), Panesar Enterprise Limited (T/A Burger King) and Others V Henry Boot Developments Ltd., [2010] EWHC 358 (Ch)

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