Introduction
The Misrepresentation Act 1967, section 3, deals with attempts to remove or limit liability for misrepresentation. AXA Sun Life Services v Campbell Martin [2011] EWCA Civ 133 offers important analysis on the distinction between terms that state no reliance was placed on a statement (a “non-reliance clause”) and terms that aim to remove liability for misrepresentation. This distinction turns on the objective intent behind the clause and how it is understood within the entire agreement. Deciding if a clause is subject to section 3 demands close examination of the contract’s language and surrounding circumstances. The case highlights the importance of clear drafting to meet desired legal effects.
The Central Question in AXA Sun Life v Campbell Martin
The primary dispute in AXA Sun Life centered on how to classify terms in financial services contracts. Campbell Martin alleged AXA made false claims about financial product returns. AXA contended their contract terms barred reliance on any such statements. The Court of Appeal had to decide whether these terms were attempts to limit liability under section 3 of the Misrepresentation Act 1967, which would require them to satisfy the reasonableness test in section 11(1) of the Unfair Contract Terms Act 1977.
Non-Reliance Clauses Compared to Liability Exclusion Terms
A non-reliance clause aims to establish that no statements were trusted, preventing a misrepresentation claim from arising. A liability exclusion term admits misrepresentation might exist but seeks to avoid responsibility. The Court in AXA Sun Life emphasized distinguishing these clauses. A valid non-reliance clause stops a claim before it starts, while an exclusion term addresses a claim that could already exist. This affects whether section 3 of the Misrepresentation Act 1967 applies.
The Court of Appeal’s Analysis
The Court reviewed the terms in question by considering the full contract and circumstances of its formation. Lord Justice Rix delivered the leading opinion, stressing the objective interpretation of terms. The Court found the clauses were non-reliance terms. They reflected an agreement that no statements were made for reliance, not an attempt to exclude liability for existing misrepresentations. Thus, the reasonableness test under section 3 did not apply.
Consequences of the Decision
AXA Sun Life provides practical guidance for contract drafting, particularly in financial services. It confirms that properly worded non-reliance clauses can prevent misrepresentation claims. However, such clauses must accurately reflect the parties’ agreement that no trust was placed on external statements. Clauses presented as non-reliance terms but functioning as liability exclusions will likely fail if inconsistent with the parties’ actual dealings.
Creating Effective Non-Reliance Clauses
Following AXA Sun Life, drafters should ensure non-reliance clauses explicitly state that no statements were made or trusted. The clause should specify its scope and be prominently placed in the contract. Supporting evidence showing no reliance occurred strengthens the clause. For example, including a counterparty’s written confirmation that they did not rely on pre-contract statements can improve effectiveness.
Comparison to Earlier Decisions
AXA Sun Life builds on prior rulings such as Watford Electronics Ltd v Sanderson CFL Ltd [2001] EWCA Civ 317. In Watford, the Court upheld a contract-wide term excluding misrepresentation liability. However, AXA Sun Life distinguishes between contract-wide terms acting as liability exclusions versus non-reliance terms, refining legal standards for such clauses. This distinction clarifies when section 3’s reasonableness test applies.
Final Remarks
AXA Sun Life Services v Campbell Martin offers clear guidance on differentiating non-reliance clauses from liability exclusion terms in misrepresentation disputes. The decision affirms that unambiguous non-reliance terms reflecting genuine agreements can block misrepresentation claims. This outcome demonstrates the importance of precise drafting and accurately recording parties’ intentions. The Court of Appeal’s approach supports principles from past cases and adds clarity for legal practitioners addressing misrepresentation and contract interpretation. By applying this decision’s framework, parties can better manage risks tied to pre-contract statements and ensure contracts properly reflect their intentions regarding trust and liability.
