COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
BRISTOL DISTRICT REGISTRY
HH Judge Graham Jones (sitting as a Deputy High Court Judge)
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE WILSON
LORD JUSTICE STANLEY BURNTON
| AXA SUN LIFE SERVICES PLC
|CAMPBELL MARTIN LTD
GARY TIBOR HOSZNYAK
|AXA SUN LIFE SERVICES PLC
|- and -
|HARRY BENNETT & ASSOCIATES LTD
HARRY EDWARD JOHN BENNETT
|AXA SUN LIFE SERVICES PLC
|- and -
|IDEAL FINANCIAL PLANNING LTD
|AXA SUN LIFE SERVICES PLC
|- and -
|KYMIN MORTGAGE SERVICES LTD
RICHARD JOHN HILL
SIMON JOHN ASTON
Andrew Spink QC and John Virgo instructed by Farrells appeared for the Respondents Ideal Financial Planning Ltd, Harry Bennett And Associates Ltd, and Harry Edward John Bennett.
Gerard McMeel instructed by Everett, Tomlin, Lloyd & Pratt appeared on behalf of the Respondents Kymin Mortgage Services Ltd, Richard John Hill and Simon John Aston.
The Respondents Campbell Martin Ltd, Brendon Partington and Gary Tibor Hosznyak were not represented.
Hearing dates: 15 & 16 December 2010
Crown Copyright ©
Lord Justice Stanley Burnton :
"This Agreement contains the terms on which [AXA] appoints the Adviser to act as their agent and provide the Services (as later defined). The Adviser has agreed to accept such appointment."
AXA is referred to in the first person, and the Adviser in the second person. The agreement is signed by the parties on the following pages. There follows a list of contents, in capital letters, giving a heading for each clause of the agreement. For present purposes, the pertinent clauses and headings are: clause 1, "Appointment"; clause 2, "Limits of Authority"; clause 3, "Your obligations"; clause 5, "Commission, Procuration Fees and Charges"; clause 7, "Business Benefits Allowance and Development Allowance"; clause 13, "Term and Termination"; clause 15, "Set Off"; clause 24, "Entire Agreement"; and clause 28, "Definitions".
"making arrangements for or with a view to another person buying (or otherwise bringing about a purchase of) a Product from an AXA Product Provider or a member of the AXA Mortgage Panel or the General Insurance Panel and advising a person on the merits of buying or selling a Product, or exercising any right conferred by a Product".
"1.1 This Agreement sets out the terms of your appointment as our Appointed Representative (subject to Clause 1.3) and agent (subject to clause 1.4) to provide the Services in relation to such of the Investment Products, Mortgage Products, Protection Products and/or the General Protection Panel Products as are set out in Schedule 5 (your "Appointment"). You agree to provide the Services in the UK from the dates specified in clause 1.4 on the terms of this Agreement. By signing this Agreement you accept the Appointment on those terms. Insofar as, at the Effective Date, you are a party to any Adviser Appointment Agreement (or other agreement appointing you as an Appointed Representative and/or agent of any member of the AXA Group howsoever named) with us or any member of the AXA Group in relation to Investment business, this Agreement shall operate as a variation of that agreement."
"1.8 In the event a Customer seeks a mortgage contract or General Insurance Contract of a type not made available by us under this Agreement, we agree that you may, strictly in accordance with the AXA Compliance Manual, effect introductions to other companies providing such contracts.
1.9. In the event a Customer seeks a Pure Protection Contract of a type not made available by us under this Agreement, we agree that you may, strictly in accordance with the AXA Compliance Manual, effect introductions to other companies providing such contracts, until close of business on 13 January 2005, or such other date as we may notify to you."
"2.1. Your authority under this Agreement is restricted to providing the Services only in relation to such of the Products provided by AXA Product Providers, the AXA Mortgage Panel, the General Insurance Panel as are specified in Schedule 5 and to providing the Services in accordance with the terms of:
2.1.1 this Agreement;
2.1.2 the FSA Handbook;
2.1.3 the AXA Professional Development Programme;
2.1.4 the AXA Advice Standards;
2.1.5 the AXA Handbook;
2.1.6 the AXA Compliance Manual;
2.1.7 any sales processes, and/or training programmes or instructions provided by AXA in relation to the provision of the Services; and
2.1.8 all applicable laws from time to time in force."
"3.23 subject to clause 1.8 and clause 1.9, you will not, without limitation, be engaged concerned or interested either directly or indirectly and whether on your own behalf or on behalf of or in association with others and in any capacity whatever in carrying on Investment Business, General Insurance Business, Pure Protection Business or Mortgage Business in competition with us anywhere within the U.K.;
3.24 you will not, without limitation, be appointed as an Appointed Representative by, or carry on Investment Business, Mortgage Business, Pure Protection Business or General Insurance Business as an Appointed Representative for, any other Firm;
3.25 you will not, without limitation, be engaged in any business other than a business we approve in writing;"
"5.5 Any decision that we make on your entitlement to commission under clause 5.1 or upon any calculation by us of Commission due or repayable under this clause 5 shall, save for manifest error, be final and conclusive and binding on you."
"1.6 A statement or certificate signed by or on behalf of us as to all or any part of the Monies due to us from you under the terms of this Schedule shall, save for manifest error, be final and conclusive and binding on you."
"15.1 We may at any time or times without notice to you set off any liability you have to us, or any Affiliate, or any company within the AXA Group against any liability that we have to you (however arising and whether any such liability is present or future, liquidated or unliquidated). Any exercise by us of our rights under this clause shall be without prejudice to any other rights or remedies available to us under this Agreement or otherwise.
15.2 All Monies payable by you to us under this Agreement shall be paid in full without any deduction or withholding other than as required by law and you will not (and renounce any right you may have to) assert any credit, set-off or counterclaim against us to justify withholding payment of any such Money or amount in whole or in part."
Clause 15.2 is another clause the effect of which is in issue.
"This Agreement and the Schedules and documents referred to herein constitute the entire agreement and understanding between you and us in relation to the subject matter thereof. Without prejudice to any variation as provided in clause 1.1, this Agreement shall supersede any prior promises, agreements, representations, undertakings or implications whether made orally or in writing between you and us relating to the subject matter of this Agreement but this will not affect any obligations in any such prior agreement which are expressed to continue after termination."
The order for the trial of preliminary issues
'Whether, on its true construction, Clause 24 (Entire Agreement) of the AXA Adviser Agreement ("the Agreement") precludes the defendants from relying on the misrepresentations and/or breaches of warranty and/or implied terms alleged in their Amended Defences and Counterclaims.'
'Whether, on its true construction, Clause 15.2 (Exclusion of Set-Off) of the Agreement, precludes the defendants from relying on the sums counterclaimed as a defence of set-off to the claimant's claim or as a ground for withholding payment of any monies payable to the claimant under the Agreement.'
'Whether, on its true construction, Clause 1.6 of Schedule 4 to the Agreement prevents the Court from determining the true amount of any Monies due to be paid by the defendants under the Agreement, in the absence of manifest error.'
'If the answer to Issue, 2 and or 3 is "yes", whether the Clause is enforceable against the defendants having regard to the provisions of sections 3, 8 and 11 of the Unfair Contract Terms Act 1977.' "
The judgment of HH Judge Graham Jones
51. On the basis of the Agreed Facts, the Defendants would not have entered into the respective Agreements and would not have suffered the losses thereby incurred but for the misrepresentations by AXA. I have held in relation to Issue 1 that the Defendants are not precluded by Clause 24 from relying on those misrepresentations. It must follow that, on the basis of the Agreed Facts, in each case the whole Agreement, including Clause 15.2 (Exclusion of Set-Off), is unenforceable.
He therefore answered Issue 2 in the negative.
57. This issue does not arise since none of the Issues have been answered affirmatively.
The parties' contentions on this appeal
Issue 1: Clause 24: the entire agreement clause
8.1 AXA would process all business submitted to it by (Campbell Martin) with reasonable care and without any unreasonable delay.
8.2 AXA would ensure that its computer processes operated efficiently so as to facilitate the completion of business submitted without unreasonable delay.
8.3 AXA would not unreasonably delay or unreasonably refuse or fail to approve the appointment of suitable company representatives recruited by (Campbell Martin).
Issue 2: Clause 15.2: no set off
Issue 3: clause 1.6 of Schedule 4: conclusive evidence
Issue 4: UCTA and section 3 of the Misrepresentation Act 1967
(i) Clause 24
(ii) Clause 15.2
(iii) Clause 1.6 of Schedule 4: conclusive evidence
Have AXA satisfied the requirement of reasonableness?
(a) the strength of the bargaining positions of the parties relative to each other, taking into account (among other things) alternative means by which the customer's requirements could have been met;
(b) whether the customer received an inducement to agree to the term, or in accepting it had an opportunity of entering into a similar contract with other persons, but without having to accept a similar term;
(c) whether the customer knew or ought reasonably to have known of the existence and extent of the term (having regard, among other things, to any custom of the trade and any previous course of dealing between the parties); …
Paragraphs (d) and (e) are inapplicable to the present claims.
7. The purpose of an entire agreement clause is to preclude a party to a written agreement from threshing through the undergrowth and finding in the course of negotiations some (chance) remark or statement (often long forgotten or difficult to recall or explain) on which to found a claim such as the present to the existence of a collateral warranty. The entire agreement clause obviates the occasion for any such search and the peril to the contracting parties posed by the need which may arise in its absence to conduct such a search. For such a clause constitutes a binding agreement between the parties that the full contractual terms are to be found in the document containing the clause and not elsewhere, and that accordingly any promises or assurances made in the course of the negotiations (which in the absence of such a clause might have effect as a collateral warranty) shall have no contractual force, save insofar as they are reflected and given effect in that document. The operation of the clause is not to render evidence of the collateral warranty inadmissible in evidence as is suggested in Chitty on Contract 28th ed. Vol 1 para 12-102: it is to denude what would otherwise constitute a collateral warranty of legal effect.
Lord Justice Wilson:
Lord Justice Rix:
Issue 1: the effect of clause 24
"(i) This Agreement and the Schedules and documents referred to herein constitute the entire agreement and understanding between you and us in relation to the subject matter thereof. (ii) Without prejudice to any variation as provided in clause 1.1, (iii) this Agreement shall supersede any prior promises, agreements, representations, undertakings or implications whether made orally or in writing between you and us relating to the subject matter of this Agreement (iv) but this will not affect any obligations in any such prior agreement which are expressed to continue after termination."
"22.1 all representations, warranties, undertakings, covenants, agreements and obligations made, given or entered into in this Agreement…shall be deemed made, given or entered into jointly and severally…"
There again, as it seems to me, "representations" must be intended as a word of contractual obligation.
"if a clause is to have the effect of excluding or reducing remedies for damaging untrue statements then the party seeking that protection cannot be mealy-mouthed in his clause. He must bring it home that he is limiting liability for falsehoods he may have told."
"The purpose of an entire agreement clause is to preclude a party to a written agreement threshing the undergrowth amd finding in the course of negotiations some (chance) remark or statement (often long forgotten or difficult to recall or explain) on which to found a claim such as the present to the existence of a collateral warranty…For such a clause constitutes a binding agreement between the parties that the full contractual terms are to be found in the document containing the clause and not elsewhere."
"An entire agreement provision does not preclude a claim in misrepresentation, for the denial of contractual force to a statement cannot affect the status of the statement as a misrepresentation. The same clause in an agreement may contain both an entire agreement provision and a further provision designed to exclude liability for misrepresentation and breach of duty."
" Those words do not, in my judgment, amount to an agreement that representations are withdrawn, overridden or of no legal effect so far as any liability for misrepresentation may be concerned. It provides that the Agreement represents the entire understanding and constitutes the whole agreement. It is in that context that the Agreement supersedes any previous representations. That is, representations are superseded and do not become terms of the Agreement unless they are included in the Agreement. If it had intended to withdraw representations for all purposes then the language would, in my judgment, have had to go further…
 In this case the statement that the Agreement superseded any previous discussions, correspondence, representations or agreement between the parties with respect to the subject matter of the agreement prevented other terms of the agreement or collateral agreement from having contractual effect. It did not supersede those matters so far as there might be any liability for misrepresentation based on them…
 Secondly, while there is a reference to representations, there is nothing in the clause that indicates that it is intended to take away a right to rely on misrepresentations…I consider that clear words are needed to exclude a liability for negligent misrepresentation and that this clause does not include any such wording."
Curtis v. Chemical and Dyeing Co
"In those circumstances, by failing to draw attention to the width of the exemption clause, the assistant created the false impression that the exemption only related to the beads and sequins, and that it did not extend to the material of which the dress was made. It was done perfectly innocently, but nevertheless a false impression was created. It was probably not sufficiently precise and unambiguous to create an estoppel: Low v. Bouverie  1 KB 442; but nevertheless it was a sufficient misrepresentation to disentitle the cleaners from relying on the exemption, except in regard to beads and sequins…
…In my opinion when the signature to a condition, purporting to exempt a person from his common-law liabilities, is obtained by an innocent misrepresentation, the party who has made that misrepresentation is disentitled to rely on the exemption. Whether you call that a rule of law or equity does not matter in these days. We have got too far beyond 1873 to trouble about distinctions of that kind."
"That, I think, plainly is a misrepresentation…In those circumstances, I think, owing to that misrepresentation, this exception never became part of the contract between the parties."
Singleton LJ simply said "I agree" (and Denning LJ was third to give judgment). Thus Singleton LJ was agreeing with Somervell LJ. It follows that the majority were not involved in Denning LJ's reasoning. Moreover, it seems to me that the majority's reasoning is understandable. An oral contract is made for the cleaning of the dress. The receipt is only advanced when the dress has already been accepted for cleaning. The receipt is an attempt to vary the common law consequences of the cleaning contract. If nothing at all had been said, and the receipt had not been signed, it might have been said that the receipt's exemption, never having been brought sufficiently to the plaintiff's attention, had never become part of the contract. As it is, the receipt had to be signed: and the rule in L'Estrange v. Graucob  2 KB 394 was invoked. Where, however, the effect of the receipt was misrepresented, it was not difficult to say that its exemption clause had not been incorporated into the contract.