Contractual Estoppel in Equitable Remedies for Commercial Litigation, Study Guides, Projects, Research of Remedies

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CONTRACTUAL ESTOPPEL

Peter de Verneuil Smith

Barrister, 3 Verulam Buildings

Overview

A. The legal history behind contractual estoppel B. How a contractual estoppel works C. The boundaries of the concept D. Statistical analysis of the contractual estoppel defence in recent English cases E. Conclusion Name of Speaker

A. The Legal History of Contractual

Estoppel

(2) The CA in Colchester & Peekay

• Colchester Borough Council [1992] Ch 421, in the context of a compromise agreement, Dillon LJ refers at 435 to a somewhat inchoate concept of

estoppel by agreement: “ Mr Tillson … is estopped

by the terms of the agreement he made from

going behind it … whether it be labelled estoppel

by agreement or estoppel by convention is a

matter of indifference.”

• Peekay v ANZ [2006] 2 Lloyds Rep 511 in which

Moore-Bick LJ said at [56]: “ Where parties express

an agreement of that kind in a contractual

document neither can subsequently deny the

existence of the facts and matters upon which

they have agreed...”

B. How a Contractual Estoppel Works

(1) The general principle

• If Party A and Party B enter into a Purchase Agreement which, for example, includes a clause to the effect that Party A warrants that it sought and received suitable advice before contracting, then Party A will be subsequently “estopped” from arguing otherwise.
• Put simply, where parties represent a fact in a contract, they will be barred from subsequently denying the truth of that fact even if both parties knew at the time of contracting that the fact was false.

C. The boundaries of the principle

(1) Restrictive Interpretation

• The Courts will construe contractual representations restrictively: - An entire agreement clause will not necessarily contractually estop misrepresentation claims (Ramsey J in, BskyB Limited [2010] EWHC 86). - Cassa di Risparmio [2011] EWHC 484 (Comm): Hamblen J explained that a non-reliance on advice clause creates a contractual estoppel as to alleged “advice”, but not other alleged mis- representations. - HSH Nordbank [2014] EWHC 142: Burton J concluded that a non-reliance clause will not contractually estop a claim for mistake.

C. The Boundaries of the Principle

(2) Reasonableness test?

• The Unfair Contracts Terms Act (UCTA) and the Misrepresentation Act will strike down “exclusion clauses” which are unreasonable. - In Raffeisen [2010] EWHC 1392 (Comm), Christopher Clarke J explained (obiter) that Section 3 might apply where on the facts “[t]he clause seeks to avoid liability for what, absent the clause, would be a clear liability in misrepresentation” (see at [306-315]). - This was approved by Aikens LJ in Springwell ([2010] EWCA Civ 1221) at §181, where he concluded that a “no representation” clause was an exclusion clause, albeit that on the facts it was reasonable.
• Consider Crestsign [2014] EWHC 3043 (Ch) where Tim Kerr QC indicated, obiter, that had the basis clause been construed as an exclusion clause (it was not), it would be unreasonable (at §120).

D. Statistical Analysis of Recent Cases

(1) Recent Growth in the Number of Cases

0 1 2 3 4 5 6 7 8 9 2006 2007 2008 2009 2010 2011 2012 2013 2014

D. Statistical Analysis of Recent Cases

(2) Significant Appellate Treatment

• Court of Appeal
  • Springwell Navigation [2010] EWCA Civ 1221 (Rix LJ, Rimer LJ, Aikens LJ)
  • Olympic Airlines [2013] EWCA Civ 369 (Tomlinson LJ, Rix LJ, Kitchin LJ)
  • Richards v Wood & Wood [2014] EWCA Civ 327 (Aikens LJ, MacFarlane LJ, Lewison LJ)
• Privy Council
  • Prime Sight Limited [2013] UKPC 22 (Lord Neuberger, Lord Wilson, Lord Reed, Lord Carnwath, Lord Toulson)

E. Conclusion

• Although the concept is well enshrined in English law, there remain a number of challenges to contractual estoppel: - Unilateral mistake: Where one party knows that the other is acting under a mistake regarding the basis clause. - Reasonableness: In the light of the decisions in Raffeisen and Springwell, a clause which parts with “reality” may be construed as an exclusion clause. - Public policy / statutory obligation: There may be circumstances where a party will not be able to rely on a contractual estoppel to avoid a statutory liability.

CONTRACTUAL ESTOPPEL

Peter de Verneuil Smith

Barrister, 3 Verulam Buildings