Facts
- Campbell Martin alleged that AXA Sun Life Services made false statements regarding the returns on financial products.
- AXA sought to prevent claims for misrepresentation by including contractual terms asserting that no reliance was placed on any pre-contractual statements.
- The central legal question concerned the classification of these terms: whether they functioned as “non-reliance clauses” (negating reliance) or as terms excluding liability for misrepresentation.
- The disputed terms were set within financial services contracts and required careful interpretation in light of the contract as a whole and the circumstances of its formation.
Issues
- Whether contract terms stating that no reliance was placed on pre-contractual statements constitute non-reliance clauses or liability exclusion clauses for the purposes of section 3 of the Misrepresentation Act 1967.
- Whether such terms, if acting as exclusions of liability, must satisfy the reasonableness requirement in section 11(1) of the Unfair Contract Terms Act 1977.
- How the objective intent of contract terms should be ascertained for the application of section 3.
Decision
- The Court of Appeal determined that the disputed clauses were genuinely non-reliance clauses, meaning they established that no representations had been made or trusted.
- These non-reliance terms precluded a claim for misrepresentation from arising, rather than excluding liability for existing misrepresentations.
- As a result, section 3 of the Misrepresentation Act 1967, and its associated reasonableness test under section 11(1) of the Unfair Contract Terms Act 1977, did not apply.
- The Court distinguished between non-reliance clauses and clauses seeking to exclude liability for misrepresentation; only the latter fall within section 3.
- The objective interpretation of the contract terms and the actual agreement between the parties were critical in categorising the clause.
Legal Principles
- A non-reliance clause, if genuinely reflecting the parties' intentions and agreement that no statements were relied upon, can prevent a misrepresentation claim from arising.
- Liability exclusion terms admit a misrepresentation could exist but seek to avoid accountability; such terms are subject to section 3 and must meet the statutory test of reasonableness.
- The distinction between these clauses depends on objective contractual interpretation and the actual substance of the parties’ dealings.
- Careful drafting and clarity in contractual terms are essential to achieve the intended legal effect.
Conclusion
The Court of Appeal clarified that properly drafted non-reliance clauses, genuinely negating reliance on pre-contractual statements, fall outside section 3 of the Misrepresentation Act 1967 and do not require the statutory reasonableness test, providing valuable guidance for contract drafting and misrepresentation litigation.