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This case considers the effectiveness of a non-reliance clause in a financing agreement and comes to the conclusion that where the party seeking to rely on the clause could not have believed that the party making the declaration had not in fact relied on pre-contract representations, then the clause will not operate to raise an estoppel. The important principles discussed are equally applicable to non-reliance provisions in IT contracts.

Quest 4 Finance Ltd vs John Maxfield, John Carter and Michael John Chesney

  • EWHC 2313 (QB), 12 October 2007 (Teare J)

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Quest 4 Finance Limited (“Quest”) provides short term payroll financing arrangements to small businesses.  In 2006 Hilmax Engineering Limited (“Hilmax”) was suffering cash-flow problems and sought a source of funding to pay its employees.

The First Defendant, a director of Hilmax, met with a broker to discuss the suitability of Quest's "Wageroller" finance product.  The First Defendant allegedly informed the broker that neither he nor his fellow directors, the Second Defendant and Third Defendants, were willing to act as personal guarantors for any loan.  In addition to assurances that no guarantee would be required, a copy of Quest’s Wageroller brochure was provided to the First Defendant by the broker.  The brochure contained the following statements:

“Importantly, no personal guarantees are required from company directors, and no charges are taken over the company…

We understand the pressure placed on directors of businesses to give personal guarantees. Wageroller has been designed to alleviate this burden with no personal guarantee necessary…

Will I have to give a personal guarantee?

No. Wageroller does not require Personal Guarantees from your Directors. All that is required is a Warranty, which is put in place to cover the event of any fraudulent acts being knowingly committed."

Quest subsequently offered Hilmax financing of £110,000. Quest had a right to terminate the financing agreement if Hilmax failed to pay any sums due or if any steps were taken to wind up the company or to put it into administration. In the event that Quest became entitled to terminate the agreement the outstanding loan amount (plus interest) became immediately repayable.  The financing agreement was signed by the First and Third Defendants.
Quest also required the three Defendants to execute a separate “Warranty” document which contained the following provisions:



(B) The Warrantor agrees to indemnify the Financier and hold it harmless against all and any losses reasonable costs (including legal costs), damages, interest and expenses it may suffer or incur by reason of any breach or breaches by the Client of the Warranties set out in the Agreement.


The Warrantor hereby warrants to the Financier that in consideration of the Financier entering into or continuing the [Finance] Agreement at the Warrantor’s request that the Client has complied with each and every warranty set out in clause 4 of the [Finance] Agreement and will continue so to comply during the currency of the [Finance] Agreement.



Before I sign this document I have had every opportunity to study it and I fully understand its nature, meaning and effect, including the obligations to be placed upon me following my signature.

In deciding to sign this document, I have placed no reliance upon any advice or opinion of: (i)  any person having an interest in the Client; or  (ii) the Client; or (iii) any person representing the interests of Quest 4 Finance Ltd."

Quest advanced the funds in August 2006. The following month Hilmax went into administration failing to repay the loan.  Quest brought an action for recovery of the loan amount together with interest.  Quest argued that it was entitled to recover these sums from the Defendants pursuant to the combined effect of the agreement and the Warranty. The Defendants argued that the Warranty should be rescinded as they were induced to sign it by Quest’s misrepresentation that it would apply only to fraudulent acts. In response, Quest argued that the effect of the no-reliance clause was to prevent the Defendants from relying on any prior representations made by Quest.


In order for a party to establish that an evidential estoppel arises by operation of a non-reliance clause it must plead and prove that each of the three requirements established in Lowe v Lombank [1960] 1 WLR 196.  These requirements are that:

  • the acknowledgement of non reliance is clear and unambiguous;
  • the party making the statement that he has not relied on a representation intends that the other party should act on that statement; and
  • the party receiving the statement of non-reliance believes it and was induced by that belief to enter into the contract.

The Defendants argued that the statements in the brochure did not constitute "advice" and that as they were made by a broker this was not a person "representing the interests of Quest".  The judge dismissed both arguments – the statements could be considered advice and a representation by an agent or employee was sufficient to constitute a representative of Quest.  The judge found that the second requirement was met, by signing the declaration the Defendants had plainly intended that Quest would act upon it. 

Quest was unable to establish the third requirement – that it believed the declaration to be true and had relied upon it.  In the judge's view, Quest had intended that potential clients reading the brochure would rely upon the clear statements it contained.  The fact that no personal guarantees were required was an attractive proposition to company directors.  Quest was aware that the brochure directly contradicted the Warranty yet made no effort was made to resolve or explain the conflict.  The judge quoted from the judgment of Chadwick LJ in Watford Electronics Limited v Sanderson CFL Limited [2001] 1 All ER 696 where it was said that:

“….it may be impossible for a party who has made representations which he intended should be relied upon to satisfy the court that he entered into the contract in the belief that a statement by the other party that he had not relied upon those representations was true.”

If Quest knew that it had made certain representations with the intention of inducing the Defendants to enter into the financing agreement, then it follows that it must also have known that the acknowledgments of non-reliance in the Warranty were not true.  Consequently, it was not then open to Quest to say that it had relied upon the Defendants' acknowledgment. The Defendants were therefore not estopped from alleging that they relied upon the misrepresentations in Quest's brochure.  The claim was dismissed and the Warranty was rescinded on the grounds of misrepresentation.


Achieving certainty as to the terms of a contract is of primary concern to contract drafters.  Entire agreement clauses Contract drafters are always concerned to achieve certainty

Non-reliance clauses are intended to prevent the parties (and more commonly the customer) from successfully pursuing a claim for misrepresentation.  Such a clause may, in principle, be capable of operating as an evidential estoppel preventing reliance on a pre-contract representation.  This will prevent the party to whom the misrepresentation was made from asserting that it relied on such a representation where it is not reflected in the contract. 

However, as can be seen from this case, the estoppel is only effective if the party receiving the expression believes it and was induced by that belief to enter into the contract. In practice this means that non-reliance clauses may be effective in relation to innocent and negligent misrepresentations but never in the event of fraud.   The judge did not find on the facts that Quest had acted fraudulently.  However his view, perhaps unsurprisingly given the rather blatant nature of the misrepresentations, was that Quest had failed to establish belief in the representation of non-reliance.  It appears from the judgment that scant evidence was in fact adduced by Quest on this crucial point. 

A further example and discussion of the application of the principles in Lowe v Lombank can be found in our case report on Watford Electronics v Sanderson.

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