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Notice effective to exclude liability under the Misrepresentation Act 1967

The Court of Appeal has recently considered whether a bank was liable under the Misrepresentation Act 1967 for misrepresenting its financial position…

The Court of Appeal has recently considered whether a bank was liable under the Misrepresentation Act 1967 for misrepresenting its financial position in a document aimed at potential investors, and the effect of a disclaimer of liability in the same document.


In the case of Taberna Europe CDO II Plc v Selskabet AF 1. September 2008 in Bankruptcy (formerly Roskilde Bank A/S) [2016] EWCA Civ 1262, the defendant bank, Roskilde, issued loan notes to Merrill Lynch in December 2006, which then marketed and sold them on, to Deutsche Bank among others. In February 2008, Taberna Europe purchased loan notes from Deutsche Bank in the secondary market. As a result of the purchase, Taberna entered two contractual relationships: one with Deutsche Bank and the other with Roskilde on the terms of the loan notes.

In July 2008, Roskilde’s financial position deteriorated and it went into bankruptcy in February 2009, as a result of which the loan notes became virtually valueless.

Taberna Europe contended that it had been induced to buy the loan notes by a misrepresentation made by Roskilde as to its financial health in a document described as an “Investor Presentation”. Roskilde had produced this document for use in conjunction with a roadshow aimed at attracting potential investors, which was subsequently published on Roskilde’s website in October 2007.

The judgment

It was held that Roskilde had intended that potential investors should have access to, and rely on, the Investor Presentation for the purpose of deciding whether to invest in its loan notes. Taberna Europe had been directed to the presentation on Roskilde’s website, with Roskilde’s encouragement.  The Court of Appeal agreed that any representations made in the presentation had therefore been made by Roskilde to Taberna Europe.

The Court then had to consider whether the disclaimers included in the presentation that no representation was made as to any information including projections and estimates, and no liability was accepted for any errors or misstatements, could be relied upon by Roskilde.

The Court of Appeal held that:

  • Where a claimant had been induced to enter into a contract by misrepresentation, any exclusion clause would usually be included within the contract itself and would become effective only once the parties had entered into the contract.
  • In this case, the misrepresentation and exclusion clauses both appeared in the Investor Presentation, which had been issued before the contract was entered into by the parties. If Roskilde was entitled to rely upon the exclusion clauses, it did so on the basis of notice to Taberna Europe of such clauses, rather than by reason of their inclusion in the contract between the parties.
  • Under section 3 of the Misrepresentation Act 1967, a term contained in a contract that restricts liability for misrepresentation made before the contract was concluded may be enforceable if it satisfies the test of “reasonableness” as defined in the Unfair Contract Terms Act 1977 (“UCTA”).  Although section 3 is silent on non-contractual notices such as that contained in the Investor Presentation, that did not mean that a notice purporting to exclude liability would be ineffective.  Section 2 of UCTA, in the context of limiting liability for negligence, makes it clear that a party may by (non-contractual) notice effectively limit or exclude liability by notice issued before a contract is entered into, provided the limitation or exclusion is reasonable.

In principle, therefore, a person can by notice effectively exclude liability for statements made. In this case, the Court of Appeal held that Roskilde could rely upon the disclaimers that were included in the Investor Presentation.

Having decided that Roskilde had no liability by reason of the disclaimers, it was not necessary for the Court to consider the level of damages that would have been payable had the disclaimers not been included. The Court did however observe that the misrepresentation claim could properly relate only to losses under the Roskilde contract, being the contract concluded by the parties to the misrepresentation. Taberna’s big loss, of course, was under the other contract, namely the purchase contract with Deutsche Bank.

What are the implications of this case?

The case highlights the need for care to be taken in the drafting of exclusion clauses in contracts and pre-contractual notices, to ensure the effectiveness of the provisions whilst bearing in mind the “reasonableness” requirements that will be applied in their interpretation.

For further guidance on the implications of this case or any corporate law matters, contact our corporate and commercial solicitors.

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