Misrepresentation Flashcards
Henderson v Merrett Syndicates
Comments on assumption of responsibility test (found originally in Hedley): Lord Delvin - essentially looking for a quasi-contractual relationship and no need for special skill (contradicting Lord Morris in Hedley), according to Lord Goff merely helps to find reliance
Redgrave v Hurd
Limits to Attwood v Small: where a negligent misrepresentation was made as to the earning capacity of a solicitor’s practice and the representee had the chance to confirm it there is still misrepresentation
NONETHELESS: defence of contributory negligence by representee
Axa Sun Life Services v Campbell Martin
Express words are necessary for exclusion of statutory misrepresentation (as it has roots in general law of negligence)
Spice Girls v Aprilia World Service (Spice girls contracted with Aprilia knowing that Geri Halliwell was going to leave)
A statement by conduct can be misrepresentative.
NOTE: Morritt VC massively expands Arden J’s narrow reading of what constituted misrep by conduct (photo shoot –> logos)
Damages for misrepresentation
MA, s. 2(1): only able to claim damages if deliberate or reckless falsehood (i.e. deceit) or negligence can be proven
Commercial Banking of Sydney v RH Brown and Co (Wool seller made inquiries through bank)
The party induced to enter contract can be addressed indirectly by misrepresentation
East v Maurer (East bought a hair salon from Maurer after he said he would not try to compete with her)
RELIANCE NOT EXPECTATION LOSS: damages should be measured in a general way i.e. not in terms of profits she would have made on that specific business if Maurer had done what he said he would (that would require contractual warranty that she would have made x amount of profit), but on the basis that she would have probably started a different business (essentially being awarded hypothetical profits for a hypothetical business)
WHAT YOU ARE COMPENSATING FOR IS BEING INDUCED INTO PLACING YOURSELF IN A POSITION YOU WOULD OTHERWISE NOT PUT YOURSELF IN
Pankhania v Hackney BC (car park)
Statements of of qualifying for misrepresentation will tend to involve issues of legal status (here, claiming that tenant protected by statute was a licensee) - misrepresentation of some element of substantive law unlikely to qualify
Horsfall v Thomas
Reliance only when knowledge of misrepresentation
Herling on half-truth
misrepresentative implications rather than statements of half-truth, see James LJ in Arkwright v Newbold - what if you quote a report and leave out the important qualification?
Misrepresentation Act 1967
s. 1: contractual warranty can amount to misrepresentation –> remedies of recession, fraudulent damages are available
Representation in pre-contractual negotiations (“become” a term of the contract)
s. 2(2): judge has discretion to refuse rescission as to combat potentially excessive use
IFE Fund v Goldman Sachs
If representor expressly refuses to assume responsibility for information (disclaimer), the court will tend to say that evaluative statements are not factual
GENERALLY statements of intention
Only generally possible to claim in circumstance of fraud, where it is obvious another secret intention was involved
Whittington v Seale-Hayne
In innocent misrepresentation, you cannot get damages on their own - only indemnity for losses incurred prior to rescission.
Farmer bought leasehold premisses that fro reasons out of everyone’s control were unsanitary. Innocent misrepresentation –> no compensation for losses (death of livestock, medical costs of employee) but compensation for costs purely arising out of the contract: rent, other financial obligations under lease
PURELY RESTITUTIONARY (other two misrepresentations - damages tend to cover these)
HIH Casualty and General Insurance v Chase Manhattan
Consideration of whether you can exclude for you agent’s unauthorised fraud.
Lord Bingham: this would have to be expressed
Caparo Industries v Dickman
Changed the rest for duty of care, Lord Oliver’s archetypal Hedley scenario:
i) where a statement is required for a purpose that the adviser knows about “actually or inferentially” ii) that the adviser knows the advice will be communicated to someone specific iii) that they know “actually or inferentially” that it will be relied on iv) that that advice is then acted on by the person known to be relying on it
Zanzibar v British Aerospace
Phrases like “any representation or warranty” will tend to be generously interpreted so that the contracting parties are not taken to have included fraud, which would leas to the clause getting struck down
Royscot Trust v Rogerson
All losses flowing directly from a negligent statement may be claimed in damages, even if unforeseeable. The car dealer was liable for all the consequences of the misrepresentation of the deposit and so had to pay off the debts owed by Rogerson to Royscot Trust.
s. 3 Misrepresentation Act
Exclusion of liability and any remedy. Such clauses are covered by the reasonable test under s. 11(1) of the UCTA (businesses) or s. 63 of the Consumer Rights Act 2015 (consumers)
Kleinwort Benson v Malaysia Mining Corporation Berhad (statement of intention in comfort letter)
No qualifying misrepresentation because no exact arrangements for how it would work in practice
Debate about statements by conduct
McKendrick:
Wouldn’t it be easier if there was a duty of good faith or a private law claim in fraud for non-disclosure
Spice girls - AWS seemed to be taking the risk of Members leaving the band (“currently comprising”) –> why would it make a difference that it had been obvious before?
Gran Gelato v Richcliff
Damages for negligent misstatement may be reduced if there is contributory negligence on the part of the innocent party (obiter by Nicholls VC)
Bisset v Wilkinson (field for sheep)
An opinion is not a statement of law/fact.
Both parties had the same knowledge (farmland had never held sheep). Where all parties have comparable knowledge, an opinion will not be elevated to a statement of fact and so will not be actionable.
IMPORTANT: phrased like an opinion (“my idea…would…”)
Misrepresentation Act 1967, s. 2(1) on Damages: definition of different sorts of misrepresentation
1) fraudulent misrepresentation (essentially tortious deceit through contract)
2) innocent misrepresentation (representor had reasonable ground to and did believe up to the point Contract was made)
3) negligent misrepresentation (lacking right fault but no reasonable ground to believe)
MISLEADING: no need to prove negligent type fault/duty to care –> statutory misrepresentation
Creamdean v Nash
Similar clause as in Overbrooke but not the same issues of agency. Vendor’s own ability to make restrictions subject to the reasonableness test.
Smith v Chadwick
A word like “turnover” that could be interpreted as an estimate rather than genuine fact, will have to be proven by plaintiff to have been statement of fact
Raiffeisen v RBS
Inconsistent with Pan Atlantic v Pine Top - “but for” test for materiality but that seems to involve issues of the represented not properly investigating representations
Smith v Land and House Property Corporation
In many circumstances, a strongly evaluative statement will be read statement of fact by courts: describing a hotel tenant as “desirable” when about to become bankrupt
Bowen LJ: equally well known?
Overbrooke Estates v Glencombe Properties
Readings of clauses are sometimes held valid which instead of excluding liability, state that no liability should arise in the first place.
BUT here, it involved the authority of non-parties to the contract to make representations (the disclaimer made by vendor on behalf of others was not subject to reasonableness test because not a disclaimer but simply limiting liability of agents) - courts held this to be a proportionate way of dealing with problems that might arise here.
Museprime Properties v Adhill Properties
Statement has to be material or inducement will not be assumed. If materiality is shown, a presumption of inducement arises and the BURDEN SHIFTS to representor to prove representee did not rely upon
Car and Universal Finance v Caldwell
Rescission can occur without the court’s say - car company succeeded in rescinding car purchased on a bad cheque because they managed to contact police and AA about his intention to do this.
Upjohn LJ - 3 things needed:
1) election to rescind within reasonable time
2) nothing done prior to this that acts to affirm contract
3) communication to counter-party in the ordinary course
EXCEPTION where fraudsters are involved because otherwise innocent parties would be unduly hurt
Remedies
For fraudulent and statutory misrepresentation you can get damages, for innocent misrepresentation you can’t (s. 2(1)).
Fraudulent: automatic right to recession (s. 2(2))
Innocent/Statutory: rescission at the discretion of the court, might offer damages in lieu (statutory)
Pan Atlantic Co v Pine Top Insurance Co
Materiality (Lord Mustill): Anything that would reasonably influence a decision to enter into contract but not crucially something hat would decisively influence
McKendrick: not material –> would be found immense
Rescission vs. termination
Rescission: tends to involve some effort on the basis of unjust enrichment to place parties in the position they were in formerly
Termination: generally stop contract dead and will start to resemble rescission if there is any need to reverse unjust enrichment
Esso Petroleum v Mardon
Where representor has some sort of special skill/knowledge, a statement of misrepresentation is likely to be seen as factual
Rescission
Available to all forms of misrepresentation. The represented must communicate their intention to rescind or obtain a court order to this effect.
Edgington v Fitzmaurice
Statement of future intention normally not actionable but can qualify as statement of fact if stating actual intention.
Bowen LJ: has to be genuine and express –> high bar as intention is generally difficult to ascertain
Keates v The Earl of Cadogan
No general duty to disclose “material facts” - misrepresentation has to amount to an express verbal statement.
Here, uninhabitable house sold to purchaser who wanted to live in in immediately
S Peason and Son v Dublin Corporation
You cannot exclude liability for fraud
With v O’Flanagan (medical practice sold when in the process of becoming unprofitable)
Despite no general duty to disclose material facts (Keates v The Earl of Cadogan), there is a duty when there is a CONTINUING REPRESENTATION.
Justification:
misrepresentation only actionable when relied upon and presumably one that becomes false will continually be relied on
Misrepresentation
Needs qualifying statement/action that misrepresents a situation
1) Materiality (statement of law/fact) - objective, if proven onus shifts
2) Reliance (inducement) - subjective, based on circumstances of contract
Atiyah on representee negligence
May guide the court to making a finding that the representation cannot have induced the contract - another way of balancing remedies?
The “fiction of fraud”
Non-fraudulent actions are treated as fraudulent, deriving from Derry v Peek, exemplified in Royscot Trust v Rogerson.
McKendrick: pointless trying to prove fraud when you can simply insert your claim into the broad ambit of s. 2(1)
Attwood v Small (earning capacity of some mines)
Where a claimant relies on his own investigation (by an agent), they are unable to claim to have relied upon misrepresentation by defendant
HERE fraud was sought to be proven so maybe higher bar and more grounds for misrepresentation in other similar cases?
Derry v Peek
Lord Herschell’s 3 possible bases for finding fraud
1) knowingly making false representations
2) false representations without any belief in their truth
3) false representations and reckless about their truth
- -> fraud requires high level of fault to be proven, now something like Ghosh dishonesty (genuine intention to cheat)
- -> remedial similarity between fraudulent/statutory misrepresentation has deep roots in common law
(public offering of shares on negligently mistaken but genuine assumption that steam powered trams could be built without state-granted licence)
What constitutes misrepresentation (McKendrick)?
1) unambiguous
2) false
3) Statement, generally more than a failure to disclose
4) sufficiently factual (not just statement on intention/opinion/general law)
5) addressed to party induced to enter contract
Re Shackleton
Statements of conduct: ordering goods carries a potentially misrepresentative implication that purchaser intends to pay for them
Hedley Byrne v Heller and Partners
Established the principle of negligent misstatement. Although there was no strict contractual relationship, the parties were sufficiently proximate to establish a special relationship and allow for claim of pure economic loss
Lord Morris: special skill was exercised for someone (under contract OR gratuitously) and reliance placed on that skill –> duty arises
(although claim failed because bank had otherwise excluded liability - easier to restrict liability for negligent misstatements, you just need a disclaimer)
Doyle v Olby (Ironmongers)
There is no way to reduce damages by a defence of remoteness for fraudulent misrepresentation (i.e. by reasonable foreseeability)
Negligent misstatement
Did a statement (whatever its characteristics) cause loss, NOT was the statement such as to induce contract and were its false qualities such as to qualify as one of the sorts of misrepresentative statements recognised by common law/statute
Howard Marine and Dredging Co v Ogden
Defendant must prove that they had reasonable grounds to believe in their statement.
Negligent misstatement vs. Statutory misrepresentation: statistical specification relating to barge which was crucial for valuing a tender was mistakenly quoted from an authority that got the figure wrong
Dimmock v Hallett
The duty where there is continuing representation can be premised on half-truth
Here, seller said land was fully led when he knew both tenants had given notice to quit.
The Skopas
“Other party” wording in s. 2(1) - applies only to contracting parties and NOT agents of the contracting parties
Jurisdiction under s. 2(1) is weighty - no consideration of the wider circumstances of the parties’ relations –> McKendrick: disproportionate, if misrepresentation is just shy of being innocent, the same damages can be won as for fraud
Bars to rescission
Bars to rescission which could prevent the remedy being granted:
a) Claimant affirming the contract, after misrepresentation discovered (Long v Lloyd)
b) lapse of time (Leaf v International Galleries - apparently related to laches though)
c) Restitution is impossible (Clarke v Dickinson)
d) 3rd party rights prevent it (Phillips v Brooks)
William Sindall v Cambridgeshire CC
Operation of s. 2(2) MA: Where a rescission causes consequences out of proportion to the seriousness of the representation (here, the loss caused to the council of having to pay Sindall vs. advantage for Sindall to get out of contract for land now worth less)
Lord Hoffmann’s “just and equitable” criteria:
1) whether or not misrep was important
2) whether loss would continue if contract upheld (or maybe better remedied like here by a one-off damage award)
3) what loss would be caused by rescission
Playboy Club v Banca Nazionale del Lavoro (going to SC)
The appellant bank did not owe a duty of care to Playboy Club’s casino for a negligent misstatement as to a gambler’s creditworthiness made to a sister company. Court of Appeal sets out the boundaries of negligent misstatement and highlights the need for caution when relying on a statement made to a group company or intermediary
Damages for fraudulent and statutory misrepresentation
Essentially the same for both actions, although you could reduce your damages for contributory negligence under statutory misrepresentation
