FoodCo UK LLP & Ors v Henry Boot Developments Limited

 

The Message

Tenants need to look before leasing.

The Case

Tenants who relied on information when agreeing to enter into their Agreements for Lease sought to hold the developer liable for misrepresentation as the development has turned out to be a commercial disaster for them In January 2008, Henry Boot opened a motorway service area known as “Stop 24” just off Junction 11 of the M20, some two miles from the Channel Tunnel and 5 miles from the Port of Dover. It had marketed the development upon the basis that it would have various amenities and it had predicted that there would be 88,000 visitors a week once it opened. The actual visitor numbers were only about 10% of this figure and some of the tenants have had to give up trading at the site.

The tenants, which included franchisees of KFC and Burger King, claimed they were tricked into entering into the Agreements for Lease because of misrepresentations made by Henry Boot in their brochures and otherwise and that, in particular, misrepresentations were made about the extent of motorway signage that would be provided, as to the likely number of visitors to the site, and as to what facilities the site would offer.

The development was described by Henry Boot as a motorway service area and the tenants claimed that they took this to mean that it was so recognised by the Department of Transport and would therefore be entitled to have signs erected on the highway directing traffic to it. Insofar as visitors’ figures were concerned, the tenants claimed that they had relied upon the Report prepared for Henry Boot by Roger Tym & Partners that they had had provided to them and that this was wholly inaccurate and that Henry Boot could have had no reasonable basis for believing that the contents were true. The tenants also relied upon the failure to provide for live departure information in relation to the cross channel services and the provision of a coach interchange.

The first point that the Judge had to decide was whether the tenants has to prove that any misrepresentations had been made fraudulently rather than negligently i.e. without reasonable grounds for believing that they were true. Although there was a disclaimer clause in their brochures, Henry Boot did not seek to rely upon this but upon the terms of the Agreements for Lease which excluded liability for any negligent representations made in negotiations and made it clear that the Agreements constituted the entire agreement between the parties.

The Judge held that the Agreements were effective to exclude any liability for any representations made other than any that had been made fraudulently or any that had been made in formal replies to Enquiries before Contract. The Judge was satisfied that the Agreements satisfied the reasonableness test imposed by the Unfair Contract Terms Act 1977 given that each of the tenants were advised by solicitors and the Agreements permitted reliance on Replies to Enquiries raised by the tenants’ solicitors. In essence, the Judge’s view was that tenants should undertake their own due diligence or ensure that their solicitors raise formal enquiries in relation to any representations made so that reliance can then be placed on any answers given.

The case, therefore, turned upon whether Henry Boot had made fraudulent misrepresentations. In order to succeed in this respect, the tenants had to establish that Henry Boot had made statements when they had no honest belief in their truth or accuracy.

The witnesses of Henry Boot made the simple point that it was Henry Boot who had lost more than anyone because of their reliance upon the Report from Roger Tym & Partners and their faith in the development. Although matters had arisen which might have caused them to query the visitor numbers and the success of the development generally, the Judge was satisfied that Henry Boot always had an honest belief in the development and what they were telling the tenants.

Given that the Report prepared by Roger Tym & Partners had been prepared by an apparently competent professional and read well and had actually been accepted by the tenants, the Judge held that Henry Boot had reasonable grounds for relying upon it but he did question why they never asked Roger Tym & Partners to revise their forecast in the light of some critical comments received from others as to the likely visitor rates and as to why no one had actually pursued Roger Tym & Partners for any explanation as to why their forecast was so widely out. It would appear they had not appreciated that the site was too close to the Tunnel and Port for visitors to want to stop there when coming or going.

Accordingly, the claim for fraudulent misrepresentation failed and the tenants remain liable under their Agreements. The particular lesson that all tenants should learn from this case is to rely upon their own due diligence and/or to raise formal Enquiries before Contract in relation to matters of particular concern so that they can then seek to rely upon any inaccuracies in any answers they receive.