The recent Court of Appeal case of J N Hipwell & Son v Szurek [2018] is a helpful reminder of the approach the court will take when analysing the effect of an entire agreement clause in the context of a commercial lease.

Loss of business claim

The claim related to a lease of a café and was brought by the tenant claiming business losses as she was forced to stop trading due to issues with unsafe electrical wiring in the café. Two incidents had occurred, the first involving a fire in the distributor board and the second which involved an electrical socket sparking less than one month later.

The tenant claimed that the landlord had either dishonestly or negligently represented that the electrics had been rewired and had passed an electrical inspection. The tenant also claimed, in the alternative, that there had been a repudiatory breach by the landlord of an implied term to maintain and repair the electrical installations in the café, a repudiation which the tenant argued she was entitled to accept.

The landlord sought to defend the claim on the basis that an entire agreement clause within the lease barred the tenant from any recourse in respect of any representation made by the landlord. However, the judge at first instance disagreed with the landlord’s reasoning, concluding that there had been a repudiatory breach of an implied or collateral duty to ensure the safe operation of the electrical installations within the premises.

Landlord appeals decision

On appeal by the landlord, the CoA ruled that the county court judge had taken the wrong approach in deciding that there should be a term implied into the lease that would make the landlord responsible for the safety of the electrical installations. In reaching this decision, the CoA relied on the law as set out in the case of Marks and Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) ltd [2016] which states that a term should only be implied if (1) the issue in question is not referred to at all elsewhere within the contract, and (2) the inclusion of an implied term is absolutely necessary to give a contract business efficacy.

Decision upheld

On the facts, the lease made no express reference to electrical installations. In fact, there were several common lease provisions which had been omitted from the lease in question, a lease which appeared to have been drafted in favour of the landlord. In relation to whether a term needed to be implied in order for the lease to make commercial sense, the CoA judges agreed that it was necessary. Dismissing the appeal, they decided that an implied term was required to give effect to the clear intentions of the parties, particularly as the landlord ultimately acknowledged that the maintenance of the electrics was within his remit. The judgment for the tenant’s business losses stood.

Lessons learnt

This case is a valuable reminder to landlords that the existence of an entire agreement clause and/or the omission of express obligations within a lease will not necessarily allow a landlord to evade responsibility for the maintenance and repair of certain facilities, particularly where safety is in issue. Landlords should therefore be cautious and give considerable thought to the drafting of such clauses, and guard against the omission of common key provisions within a lease.