is an
English contract law
English contract law is the body of law that regulates legally binding agreements in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries ...
case on
misrepresentation
In common law jurisdictions, a misrepresentation is a false or misleading '' R v Kylsant'' 931/ref> statement of fact made during negotiations by one party to another, the statement then inducing that other party to enter into a contract. The m ...
. It examines the
Misrepresentation Act 1967
The Misrepresentation Act 1967 is a United Kingdom Acts of Parliament in the United Kingdom, Act of Parliament of the United Kingdom which amended the common law principles of Misrepresentation in English law, misrepresentation. Prior to the Act, ...
and addresses the extent of damages available under s 2(1) for negligent misrepresentation.
The court controversially decided that under the Act, the appropriate measure of damages was the same as that for common law fraud, or damages for all losses flowing from a misrepresentation, even if unforeseeable. The
reasoning
Reason is the capacity of consciously applying logic by drawing conclusions from new or existing information, with the aim of seeking the truth. It is closely associated with such characteristically human activities as philosophy, science, lang ...
of the decision has been much criticised by academic lawyers such as
Treitel
Sir Guenter Heinz Treitel (26 October 1928 – 14 June 2019) was a German-born English academic and Vinerian Professor of English Law.
Treitel was born in Berlin into a Jewish family, the son of a prominent lawyer, Theodor Treitel, and his wife ...
and Hooley, partly for its overly
literal interpretation of the statute, and for its dubious finding of fact that a deliberately false document was made negligently, rather than fraudulently.
Facts
Rogerson acquired on
hire purchase
A hire purchase (HP), also known as an installment plan, is an arrangement whereby a customer agrees to a contract to acquire an asset by paying an initial installment (e.g., 40% of the total) and repaying the balance of the price of the asset pl ...
a used
Honda Prelude
The Honda Prelude is a car produced by Japanese car manufacturer Honda from 1978 until 2001. The two-door coupe was loosely derived from the Honda Accord, and spanned five generations. The Prelude was used by Honda to introduce the Japanese Honda r ...
from a car dealer, Maidenhead Honda Centre Ltd. The car was priced at £7600, Rogerson paying a £1200 deposit, some 15.8% of the total. The balance came from a finance company, Royscot Trust Ltd. On Rogerson's behalf, the dealer filled in the application forms, falsely misrepresenting that the total cost was £8000 and the deposit was £1600 (20% of the total). Royscot approved the loan; but, had accurate figures been stated, they would have refused finance since its policy was not to lend money if the deposit was less than 20%.
Rogerson began paying instalments, but in due course had cashflow difficulties. In August 1987 he dishonestly sold the car, knowing the car was not yet his to sell. A year later, he informed the finance company of the sale, and stopped paying instalments in September 1988, leaving the balance unpaid.
Royscot sued the car dealer in damages, alleging that they had relied upon the dealer's misrepresentation, which induced them into the finance plan. Fraud was not mentioned, but Royscot claimed that had the dealer given the correct figures, they would have refused finance, and that the £3,625·24 loss was the dealer's fault. The dealer countered that the actual cause of Royscot's loss was Rogerson's unlawful sale of the car, since, if he had not sold it, Royscot would be entitled to its repossession. The dealer alleged Rogerson's unlawful sale broke the
chain of causation between any misrepresentation and Royscot's loss.
Judgment
Balcombe LJ and
Ralph Gibson LJ held:
* That for negligent misrepresentation under s.2(1), the correct measure of damages was tortious and the same as that for the
tort of deceit
The tort of deceit is a type of legal injury that occurs when a person intentionally and knowingly deceives another person into an action that damages them. Specifically, deceit requires that the tortfeasor
* makes a factual representation,
* kn ...
.
* The car dealer was liable for all the consequences of his misrepresentation, and therefore had to pay the losses incurred by Royscot Trust Ltd.
* Rogerson's wrongful sale of the car was foreseeable and not a break in the chain of causation.
The following passage of Balcombe LJ's judgment is key:
B
Case summary
The case caused some alarm among academic and practising lawyers. Given the relative lack of blameworthiness of a non-fraudulent defendant (who is at worst merely careless, and at best has an honest belief on reasonable grounds) for many years lawyers presumed that for non-fraudulent misrepresentation damages would be on a contract/
negligence
Negligence (Lat. ''negligentia'') is a failure to exercise appropriate and/or ethical ruled care expected to be exercised amongst specified circumstances. The area of tort law known as ''negligence'' involves harm caused by failing to act as a ...
basis requiring reasonable foreseeability of loss.
''Royscot Trust Ltd v Rogerson'' changed all that. The court gave a
literal interpretation
Literal and figurative language is a distinction within some fields of language analysis, in particular stylistics, rhetoric, and semantics.
*Literal language uses words exactly according to their conventionally accepted meanings or denotation. ...
of s.2 (which, to paraphrase, provides that where a person has been misled by an innocent misrepresentation then, if the misrepresentor would be liable to damages had the representation been made fraudulently, that person "shall be so liable"). The phrase "shall be so liable" was read literally to mean "as liable as for fraudulent misrepresentation". So, under the Misrepresentation Act 1967, damages for innocent misrepresentation are calculated as if the defendant had been fraudulent, despite the absence of deceit.
Although this was almost certainly not the intention of Parliament, no changes to the law have been made to address this discrepancy. This is known as the fiction of fraud and also extends to tortious liability.
[See '' East v Maurer'' ]991
Year 991 (Roman numerals, CMXCI) was a common year starting on Thursday (link will display the full calendar) of the Julian calendar.
Events
* March 1: In Rouen, Pope John XV ratifies the first Peace and Truce of God, Truce of God, between ...
2 All ER 733. (S.2 does not specify how "damages in lieu" should be determined, and interpretation of this point is up to the courts).
It is also unclear why the dealer's misrepresentation should have been considered "non-fraudulent" when it seems plain that the dealer deliberately misled the finance company. Arguably, this case should have been considered "fraudulent" as it complied with the 3-part guidelines of ''
Derry v Peek
''Derry v Peek'' 889UKHL 1is a case on English contract law, Misrepresentation">fraudulent misstatement, and the tort of deceit.
''Derry v Peek'' established a 3-part test for fraudulent misrepresentation, whereby the defendant is fraudulent if ...
''. Since no reference was made to ''Derry v Peek'', this case is open to challenge as ''
per incuriam
''Per incuriam'', literally translated as "through lack of care" is a device within the common law system of judicial precedent. A finding of ''per incuriam'' means that a previous court judgment has failed to pay attention to relevant statutory pr ...
''.
See also
*''
Doyle v Olby (Ironmongers) Ltd
''Doyle v Olby (Ironmongers) Ltd'' 9692 QB 158 is an English contract law case concerning fraudulent misrepresentation. It illustrates and emphasizes the differing measures of damages for deceit and breach of contract.
Facts
Herbert Doyle bought ...
''
969
Year 969 ( CMLXIX) was a common year starting on Friday (link will display the full calendar) of the Julian calendar, the 969th year of the Common Era (CE) and ''Anno Domini'' (AD) designations, the 969th year of the 1st millennium, the 69th ...
2 QB 158
Notes
{{reflist, 2
English misrepresentation case law
Court of Appeal (England and Wales) cases
1991 in case law
1991 in British law