Misrepresentation
Dimmock v Hallett (1866)
A half-truth may be misrepresentation. A statement that the land was let to tenants was a misrepresentation because he failed to disclose that the tenants had given notice to quit.
DPP v Ray [1974]
A person who sits down in a restaurant and orders a meal impliedly represents that he means to pay.
Representation definition
A pre-contractual statement of fact, whether express or implied, which leads the representee to enter into a contract with the representor.
Hedley Byrne & Co Ltd v Heller & Partners [1964]
Appellants instructed their bank to request a bankers' report on the creditworthiness of a potential client from the client's bank. HoL held there was a tortious duty of care. Where a special relationship existed between the parties, one is taken to have assumed a responsibility to prevent negligently caused economic loss to the other.
Schnieder v Heath (1813)
Defects in the ship's bottom were fraudulently concealed. Held this was misrepresentation - misrepresentation could be conduct. Preventing buyers seeing the true state fo the vessel.
Buyers must rely on the statement - it must have played a real and substantial part in their decision whether to enter the contract.
Attwood v Small (1838)
Overbrooke Estates Ltd v Glencombe Properties Ltd [1974]
Before the auction the auctioneers had told the defendants the local authority had no plans for the property and were not likely to seek compulsory purchase. Auctioneers' conditions of sale included the clause "the vendors do not make or give and neither the auctioneers nor any person in the employment of the auctioneers has any authority to make or give any representation or warranty in relation to [the property]". Court held the clause was not subject to the reasonableness test. It made sense to warn bidders to take auctioneers' statements in context. Principal can limit his agents' authority to make representations.
Where statement is an honest expression of opinion it is not actionable.
Bisset v Wilkinson (1927)
For negligent misstatement, loss must be foreseeable, must be sufficiently proximate, and must be fair, just and reasonable to impose a duty of care.
Caparo Industries plc v Dickman (1990)
Provided the representee has established on objective grounds he made a final and irrevocable decision to rescind, that is sufficient.
Car and Universal Finance v Caldwell (1965)
Spice Girls Ltd v Aprilia World Service BV [2002]
CoA held participation of the band members in a photo shoot amounted to misrepresentation by conduct that they had no reason to believe any band members would leave before the minimum term. Negotiations proceeded on the implicit basis the band would continue to consist of all five members.
Howard Marine & Dredging Co Ltd v A Ogden & Sons (Excavation) Ltd [1978]
CoA held s.2(1) negligent misrepresentation succeeded (but no negligent misstatement). They had demonstrated no reasonable ground to disregard figure in their documents and to prefer Lloyd's Register regarding the barges' carrying capacity.
Car & Universal Finance Co Ltd v Caldwell [1965]
CoA held the defendant had validly rescinded the contract by giving notice of his intention to do so to the police and the AA. What needs to be established on objective grounds is making a final and irrevocable decision to rescind. Normally requires contact with representor, but here they absconded. Therefore, recoverable against the plaintiff who obtained the car in good faith.
Disadvantages of negligent misrepresentation
Damages could be reduced for contributory negligence
Derry v Peek (1889)
Defendants issued prospectus for shares stating they had the right to power trams mechanically. This was incorrect and plaintiff brought action for damages in deceit. HoL held action failed because fraud hadn't been made out. It must be shown that false representation has been made knowingly or without belief in its truth or recklessly, careless whether it be true or false. Here, they honestly but mistakenly believed they would be given permission.
S. Pearson & Son Ltd v Dublin Corporation [1907]
For fraudulent misrepresentation, all exclusion of liability is ineffective for public policy reasons.
Whittington v Seale-Hayne (1900)
For innocent misrepresentation (that the premises were in a good state of repair), all which could be claimed was an indemnity to cover financial obligations imposed by the lease, and not the loss of flock and medical expenses after they were poisoned by water.
Advantages of negligent misrepresentation
Good damages. Burden of disproving the fault lies on the defendant. Proof of culpability isn't required.
Liability under s.2(1) essentially founded on negligence so damages could be reduced for contributory negligence.
Gran Gelato Ltd v Richcliff (Group) Ltd (1992)
Negligent misstatement occurs where there is a special relationship, and the provision of a skill, information or advice for another's benefit to be relied upon, which was given negligently. Capable of being statements of opinion, advice and belief unlike misrepresentation.
Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964)
Lord Bowen LJ in Smith v Land and House Property Corporation (1884)
In a case where the facts are equally well known to both parties, it is frequently just an expression of opinion. But if the facts are not equally known to both sides, a statement of opinion by one who knows the facts often involves a statement of a material fact, for he impliedly states that he knows facts which justify his opinion.
Silence cannot amount to a misrepresentation.
Keates v The Earl of Cadogan (1851)
Gran Gelato Ltd v Richcliff (Group) Ltd [1992]
Liability under s.2(1) essentially founded on negligence, so an award of damages can be reduced for contributory negligence.
Statements of law can now be the basis of actions for misrepresentation.
Pankhania v Hackney Borough Council (2002)
Smith v Land and House Property Corporation (1884)
Plaintiffs described the tenant as a "most desirable" tenant when he was in arrears. Plaintiffs sought specific performance and defendants counterclaimed for rescission for misrepresentation. CoA held the plaintiff's statements amounted to misrepresentation. Expression of opinion involved the implied assertion of a factual basis. If the facts are not equally known to both sides, a statement of opinion by one who knows the facts often involves a statement of a material fact.
Innocent definition
Pre-1967 = non-fraudulent Post-1967 = without fault
Notts Patent Brick and Tile Co v Butler (1866)
Purchaser of land asked vendor's solicitors whether the land was subject to restrictive covenants. Solicitor replied that he wasn't aware of any, but didn't say the reason he wasn't aware was that he hadn't bothered to check - misrepresentation.
Where a misrepresentation is made and the misrepresentee is given the opportunity to test the accuracy of the statement but does not take it, the misrepresentation will still be considered an inducement.
Redgrave v Hurd (1881)
Advantages of fraudulent misrepresentation
Rescission is a right and not a discretion. No requirement of materiality. No danger of contributory negligence. Cuts through exclusion clauses.
Remedy for innocent misrepresentation
Rescission. No entitlement to damages. A indemnity may be ordered to reimburse claimant for expenditure in meeting obligations imposed by contract prior to rescission (prevents unjust enrichment - does not compensate).
There is no need to prove materiality when the representation is fraudulent.
Ross River Ltd v Cambridge City Football Club [2007]
All loss is recoverable for s.2(1) misrepresentation under the fiction of fraud.
Royscot Trust v Rogerson (1991)
An example of misrepresentation by conduct.
Spice Girls Ltd v Aprilia World Service BV (2002)
Reliance definition
The importance of the representation in the mind of the representee in deciding whether to enter into the contract.
Hooley on Royscot Trust v Rogerson (1991)
The judgment treats "the foolish but honest man as if here were dishonest". Garnered a lot of academic criticism.
Materiality definition
The propensity of the representation to affect the mind of a reasonable person.
Rescission definition
The retroactive undoing of the contract. Restores the parties to the positions they would have been had they not entered the contract - set aside both retrospectively and prospectively. May take place informally or by court order. It is voidable - doesn't automatically happen.
Termination definition
The withholding of further performance of the contract.
Redgrave v Hurd (1881)
Where a misrepresentation is made and the misrepresentee is given the opportunity to test the accuracy of the statement but does not take it, the misrepresentation will still be considered an inducement.
The right to rescind survives even if the statement has been incorporated as a term if it is also a representation.
s.1(a) Misrepresentation Act 1967
Courts retain a statutory discretion to withhold rescission and award damages in lieu of rescission if it would be equitable to do so for negligent or innocent misrepresentation.
s.2(2) Misrepresentation Act 1967
If a contract contains a term which would exclude or restrict liability for misrepresentation or any remedy available for misrepresentation, the term shall not have effect unless it satisfies reasonableness test of s.11 UCTA 1977.
s.3 Misrepresentation Act 1967
Common law bars to rescission
Affirmation Lapse of time Third-party rights Impossibility
Attwood v Small (1838)
Buyers had relied on their agents' investigations which had upheld the statements, and not on the statements made by the sellers, so there was no misrepresentation about the earning capacities of the mines.
Pankhania v Hackney Borough Council [2002]
CoA held that a statement of law could give rise to a remedy.
Royscot Trust v Rogerson [1991]
CoA held that all loss was recoverable for s.2(1) misrepresentation, just as it was for fraudulent misrepresentation - the 'fiction of fraud'. Not limited to foreseeable loss.
McCullough v Lane Fox and Partners Ltd [1996]
CoA held the vendor's agent's disclaimer of responsibility negatived liability for negligent misstatement. It was clear the defendants were not assuming responsibility for the statement.
East v Maurer [1991]
Correct calculation of damages was not what he might have earned if the misrepresentation had been true, but what she might have earned if she bought a similar business in the same area and ran it the normal way. Otherwise you are treating the misrepresentation as a contractual promise which has been breached.
William Sindall plc v Cambridgeshire County Council [1994]
Council represented there were no easements affecting the property but actually a sewer crossed the land. CoA held there was no misrepresentation, and if there had been, rescission would have been disproportionate so would have used s.2(3) discretion to award damages in lieu.
Keates v The Earl of Cadogan (1851)
Court held there was no misrepresentation when a house to let was uninhabitable. The defendant had done nothing to induce the plaintiff to suppose the house was habitable. Plaintiff could have made his own enquiries. Silence doesn't amount to misrepresentation.
Where misrepresentation would have induced a reasonable person (material), the courts will presume it did induce the representee (reliance). When it would not have induced a reasonable person to enter a contract, the recipient must prove that it did.
Dadourian Group International Inc v Simms [2009]
Edgington v Fitzmaurice (1885)
Defendants sent out a prospectus to shareholders stating the money would be used for expanding the company's business when in fact they intended to use the money to pay off creditors. CoA held there was misrepresentation. A state of a man's mind is as much fact as the state of his digestion - it is a misstatement of fact.
Cremdean v Nash (1977)
Defendants' invitation contained a statement of the total lettable office space for which there was planning permission but true figure was lower. Document contained clause that particulars "although they are believed to be correct their accuracy is not guaranteed and any error, omission or misdescription shall not annul the sale or be grounds on which compensation may be claimed and neither do they constitute any part of an offer of a contract. Any intending purchaser or tenant must satisfy himself by inspection otherwise as to the correctness of each of the statements." CoA held the clause was subject to s.3 - party can't claim representations clearly made by him were not representations. An attempt to limit liability would be subject to reasonableness test.
To establish fraud, it must be shown that false representation has been made knowingly or without belief in its truth or recklessly, careless whether it be true or false.
Derry v Peek (1889)
Statements which are literally true but still mislead may amount to a misrepresentation - a half-truth.
Dimmock v Hallett (1866)
Advantages of negligent misstatement
Don't need a contract; don't need the statement to be false, just negligent; could be opinion or belief - wider than misrepresentation.
No limitation on loss recoverable in the tort of deceit by reference to foreseeability. Loss just must be shown to have been caused by the transaction.
Doyle v Olby (Ironmongers) Ltd (1969)
With v O'Flanagan [1936]
During negotiations for sale of medical practice, defendant stated it was making £2000 a year which was true at the time. Between January and May when the contract was concluded, business was neglected due to his ill health and practice only took in £15 in the three weeks before contract concluded. CoA held a representation has continuing effect from the time of its making until the contract's conclusion, so the representation had become false. A representor has a duty to correct a statement if it becomes misleading.
Damages won't be awarded for the profits which would have been made if there had been no misrepresentation because then it is being treated as a contractual promise.
East v Maurer (1991)
A misrepresentation as to the state of a man's mind is a misstatement of fact.
Edgington v Fitzmaurice (1885)
The misrepresentation need not have been the only inducement, but just actively present in the claimant's mind at the time he entered the contract.
Edgington v Fitzmaurice (1885)
The assumption of responsibility test for negligent misstatement - extends beyond contracts.
Henderson v Merrett Syndicates (1995)
Disadvantages of fraudulent misrepresentation
High burden of proof. If you allege fraud and lose, must pay costs. Most misrepresentations settle out of court, but alleging fraud would likely go to court. Can't allege negligent misrepresentation as a backup
Henderson v Merrett Syndicates [1995]
HoL held Hedley Byrne applied to relationships outside of contracts as well as contractual relationships. The test is whether there was a voluntary assumption of responsibility.
Caparo Industries plc v Dickman [1990]
HoL held for liability for negligent misstatement the loss must be foreseeable, there must be sufficient proximity, and it must be fair, just and reasonable to impose a duty of care.
Defendant was personally honest, but there was no objectively reasonable ground for him to prefer the Lloyd's register so he was s.2(1) negligent.
Howard Marine & Dredging Co Ltd v A Ogden & Sons (Excavation) Ltd (1978)
There is a different approach to contractual exemptions for negligent misstatement - they show a lack of assumption of responsibility.
McCullough v Lane Fox and Partners Ltd (1996)
For fraudulent misrepresentation, all exclusion of liability is ineffective for public policy reasons.
S. Pearson & Son Ltd v Dublin Corporation (1907)
Conduct can amount to misrepresentation.
Schneider v Heath (1813)
Bisset v Wilkinson [1927]
Seller told buyers "my idea was that it would carry 2000 sheep". Buyers knew the seller had not been working the land as a sheep farm. Found it would not carry 2000 sheep and sought rescission. Privy Council held the seller's statement had been an honest expression of opinion so not actionable.
If the facts are not equally known to both sides, a statement of opinion by one who knows the facts often involves a statement of a material fact, for he impliedly states that he knows facts which justify his opinion.
Smith v Land and House Property Corporation (1884)
Indemnity definition
The monetary compensation for obligations which the contract has created and imposed on a misrepresentee.
Doyle v Olby (Ironmongers) Ltd [1969]
There is no foreseeability limitation on loss recoverable in the tort of deceit, loss just must be shown to have been caused by the transaction.
Court held damages weren't available for innocent misrepresentation, so all that could be awarded was an indemnity to cover the financial obligations imposed by the lease.
Whittington v Seale-Hayne (1900)
There was no misrepresentation, but if there had been the court would have used their discretion to award damages in lieu.
William Sindall plc v Cambridgeshire County Council (1994)
If a representation is made which later becomes misleading due to a change in circumstances, it becomes a misrepresentation if nothing is done to rectify it.
With v O'Flanagan (1936)
Where a party has entered a contract after a misrepresentation was made and suffered loss, then if person making misrepresentation would be liable in damages if the misrepresentation had been made fraudulently, then the person will be liable, unless he proves he had reasonable ground to believe and did believe up to the time the contract was made the facts represented were true.
s.2(1) Misrepresentation Act 1967