Mootinghandbook13 - De Montfort University · Web viewWhether there was such inducement (and consequent reliance on the representation) is a question of fact in every case. SMITH

De Montfort Law School

Schools and Colleges

Mooting Competition2015

1

CONTENTS

Introduction 2

Programme 3

Mooting Instructions 4

Contract books and looking up cases 7

Round One Moot 9

Round Two Moot 10

Moot Final 11

Background Notes on Misrepresentation 12

vm/lawclub/mootinghandbook13

2

INTRODUCTION

Welcome!

The De Montfort Schools and Colleges Mooting Competition is now in its twelfth year. We hope you find participating in moots an enjoyable and rewarding experience. If you do go on to study law at university, we trust that you will have found it useful to have had a first shot at it before starting on your degree course. Most university law schools run student mooting competitions and also enter teams for national competitions.

All the moots in our competition are designed for students who have not studied A-level law. We have included a set of background notes on the law of misrepresentation. All the moots depend on arguing first whether or not the contract has been made voidable by an actionable misrepresentation and secondly if the contract can be avoided whether the remedy of rescission can be exercised.

If you need to contact the Law School the telephone number is 257 7177 and you can e-mail Andy Robinson at [email protected]

Andy RobinsonLaw Club Organiser


3

PROGRAMME

Tuesday 13th January 2015

Andy Robinson will explain how the mooting competition is organised, followed by a demonstration moot by two De Montfort University students. After refreshments you will have the opportunity to sign up for the Leicestershire Schools and Colleges Mooting Competition, and get advice on how to present your moot.

Tuesday 27th January 2015

The first round of the mooting competition. The best eight teams (on their point scores) will be invited to take part in the second round of the competition.

Tuesday 10th February 2015

Second round/semi-finals of the mooting competition. These will be arranged individually with the contestants. The best two teams will be invited to take part in the final.

Tuesday 10th March 2015

The Final of the Mooting Competition is open to all the members of Law Club, parents and teachers to watch. This session of Law Club will start at 6.30pm and will probably end slightly earlier than usual. The moot will be judged by Emeritus Professor Richard Card who was formerly Head of the Law School.


4

MOOT INSTRUCTIONS

1. Moots are legal debates in a hypothetical courtroom setting, in which students play the role of counsel and present legal arguments based on a fictitious legal action. Use the misrepresentation chapter(s) in contract textbooks and the material on formation of contract at the back of this booklet to establish the legal points at issue and then go to the original cases - both for your case and for your opponents - so that you can attempt to distinguish their cases and contradict their arguments.

2. You will sign up to play the role of:

leading (senior) counsel for the appellant or leading counsel for the respondent or junior counsel for the appellant or junior counsel for the respondent.

3. Your part in the moot should last ten minutes including time for the judge to stop your speech and ask questions. The whole moot is scheduled to last an hour. The judge will time your speech and will ask you to bring your remarks to a close if you are over-running your time.

4. Most judgements in a moot problem question are divided into two, the leading counsel takes point (i) and the junior counsel point (ii).

5. Leading counsel for the appellants, who is the first speaker, must begin by introducing all the counsel. The speech should start with

"My Lord/My Lady I am Mr/Mrs/Miss/Ms ........and I am representing the appellant with learned junior Mr/Mrs/Miss/Ms...... The respondents are represented by my learned colleague Mr/Mrs/Miss/Ms.... and his/her learned junior Mr/Mrs/Miss/Ms..."

6. Refer to the judge(s) as My Lord, Your Lordships, My Lady, Your Ladyships as the case may be.

7. At the start of your speech tell the judge what you intend to show in your argument.

8. If you disagree with a point made by a judge when you are speaking then reply 'With all due respect your Lordship' and then tell him/her why you think they are wrong. If you feel compelled to agree with the judge on a point that goes against your case, you reply ' As your Ladyship pleases' (not advisable unless forced!). Details on how to address judges are given on the judiciary web-site, http://www.judiciary.gov.uk/you-and-the-judiciary/going-to-court/what-do-i-call-judge


http://www.judiciary.gov.uk/you-and-the-judiciary/going-to-court/what-do-i-call-judge

5

9. Some students say that dressing up smartly helps them to take on the role of a barrister. There is no need to buy a suit especially for your moot. Dark trousers/skirt and a smart blouse/shirt is fine. You should stand to deliver your speech.

10. Finish your submission with ' Thus I ask you to find for my client' or some similar phrase.

11. The order of counsel will be:

Leading counsel for the appellants Leading counsel for the respondents Junior counsel for the appellants Junior counsel for the respondents

There is no right of reply.

12. Please submit to the judge at the beginning of the moot a photocopy of the pages of the cases that your will cite with the relevant passages highlighted or underlined. There is no need to photocopy the whole case - just the relevant page. Your collection of photocopied pages is often referred to as your “bundle”.

13. Marks are awarded for presentation, so remember to look at the judge and not to speak too quickly. The best mooters do not read their scripts but have memorised their speech and use the script merely as a memory aid. Remember that textbooks are rarely cited in court so you must quote from the judgements in the cases - DO NOT CITE

from case headnotes (i.e. the synopsis at the beginning of the case report) from speeches made by counsel (only speeches from judges) from textbooks (including case books) from a quotation from one case that is mentioned in a second case

Cite cases correctly:

Fisher AND Bell is correct even though it is written Fisher v BellIn civil cases describing the case as Fisher versus Bell or Fisher 'vee' Bell is wrong.

Try to find some good citations from the cases. You should give the page reference and paragraph of the report “May I refer your Lordship/Ladyship to Volume 1 of the All England Reports for 1946 at page 63 paragraph X…where Lord…says…[read out the precise words from the Report]”

14. Do not invent more facts in the scenario, just discuss the facts that you are given and the relevant law.

15. You might find some useful tips on the national web-site www.mootingnet.org.uk which is designed for university student mooters.


http://www.mootingnet.org.uk/

6

MARKING GUIDELINES

CONTRACT MOOTS

A PRESENTATION (50%)

General Presentation (25%)

Voice, clarity, diction and speed Eye contact Keeping to time Responding to questions

Structure and coherence of the argument (25%)

B LEGAL CONTENT (50%)

Accuracy, relevance and selection of the law in the general argument (25%)

Law used in responding to questions (10%)

Use of authorities and references (15%)

To proceed to the second round the mooters with the highest marks will be selected. It is not a knock-out competition.


7

CONTRACT TEXTBOOKS

All the following contract textbooks have a chapter(s) on misrepresentation. You may be able to borrow them from your local library. Any editions published since 2002 would not be seriously out of date on this topic.

Ewan McKendrick Contract Law Macmillan

Lawrence Koffman & Elizabeth Macdonald The Law of Contract Tolley

Jill Poole Textbook on Contract OUP

Jill Poole Casebook on Contract OUP

M.P.Furmston Cheshire, Fifoot and Furmston's Law of Contract OUP

G.H.Treitel The Law of Contract Sweet & Maxwell J.Adams & R.Brownsword Understanding Contract Law Sweet & Maxwell H.G.Beale,W.D.Bishop& M.P.Furmston Contract Cases and Materials Butterworths

Catherine Elliott and Contract Law Pearson Longman Frances Quinn

And there are the following books about mooting

Paul Dobson and The Observer Book of MootsBarry Fitzpatrick

Christopher Kee The Art of Argument: A Guide to Mooting (CUP)

Tim Kaye and Blackstone’s Book of Moots (Blackstone)Lynne Townley

John Snape and The Cavendish Guide to Mooting (Cavendish)Gary Watt

John Snape How to Moot (OUP)and Gary Watt


8

Looking up cases

For example Pharmaceutical Society of GB v Boots [1953] 1 QB 401; [1953] 1 All ER 482; [1953] 2 WLR 427 was reported in 1953. The first number after the date is the volume number. QB stands Queen’s Bench, All ER stands for All England Reports and WLR stands for Weekly Law Reports. The last number is the page number. ER stands for English Reports and are a set of old (pre 1865) cases reprinted from the original reports. The complete set is in the DMU Law Library.

Looking up cases on web-sites

DMU subscribes to “Lexis Library” the general public cannot access Lexis but you will be given a code that you can look up the cases on this web-site. The code will be operative throughout the Mooting Competition. If you have any difficulties accessing Lexis please contact us. www. lexisnexis .com/uk/legal

Bailii is a free web-site that does not need a password. “bailii” stands for The British and Irish Legal Information Institute. This web-site is not as comprehensive as Lexis but does have some case details and legislation www.bailii.org


http://www.bailii.org/

http://www.lexisnexis.com/uk/legal

9

ROUND ONE MOOT

Janet Saunders put an advertisement in the Dance and Dancers’ magazine that, due to retirement on ill-health grounds, she was planning to sell the Nottcester Academy of Dance, a business that she ran with two employees. The Academy operated in rented premises above shops in Nottcester city centre and classes were run every week day from 4pm until 8pm and all day on Saturdays.

In March Janet discussed the business with Karen, one of her former pupils, who had not been to Nottcester for many years. Karen was hoping to purchase the business after many years working as a dancer abroad. Janet stated that she had 150 pupils attending classes, which was true. She also stated that she believed that the profits were running at £28,000 a year which was true. She also stated that her two employees were excellent and that she ran the only ballet dancing classes in Nottcester and she gave Karen her pupils’ results in the Royal Academy Ballet Examinations which were extremely good.

Between March, when Janet accepted Karen’s offer of £125,000 and July when the contract was finalised many of the classes had to be cancelled because of Janet’s illness. This cancellation of classes was not communicated to Karen.

Karen took over the business in August and spent money refurbishing the changing area and installing showers. She was very disappointed in the response to her initial mailing to pupils and found that there was a thriving ‘Stage and Musical Dancing School’ in Nottcester which had been set up some years before, after she had left the town. Moreover, once classes began, she found that one of the employees was always late. The other employee told Karen that the late employee often failed to turn up altogether and never sent apologies. The final straw came when the shops below the school contacted the landlord in September and asked that all classes should start at 5.30pm to prevent disturbance to their customers. The landlord was able to enforce this. The shopkeepers had not complained before September.

Mrs Justice Witter made the following findings of fact: that one of the employees was frequently absent or late and that the Nottcester Academy of Dance ran the only ballet dancing classes in Nottcester.

Mrs Justice Witter held

(i) There were no actionable misrepresentations as Janet’s statements were either opinions (Bisset v Wilkinson applied) or if they were facts they were true.

(ii) Karen had lost the right to rescind because she had

a) affirmed the contract by refurbishing the changing area and installing showers (Long v Lloyd applied) and/or

b) “retitutio in integrum” was no longer possible as the structure of the premises had been altered (Erlanger v New Sombrero Phosphate applied).

Karen wishes to appeal to the Moot Court of Appeal.

Senior counsel should take point (i) and junior counsel should take point (ii


10

ROUND TWO

THOMPSON v WALTERS

Kevin Thompson owns a mobile phone shop in Market Street in Nottcester, and has told Mike Walters that he is thinking of selling it in order to set up a café bar with the money raised. When Mike expresses interest, Kevin said that the shop was making good profits, and if Mike would like to check the books he could supply them. Mike, trusting Kevin, did not take up the offer. He thought that Kevin must be going well, as he drove a new BMW with personalised number plates.

When Mike came to look around the shop in April, Kevin told him that there were many students in the area, as the main campus of Demon University was very close and that it was well known that the main users of mobile phones were young people. He added that there were no other mobile phone shops in the area.

Mike bought the business in June, and immediately found that the shop was barely making a profit. Nevertheless he decided to redecorate the shop, and to expand the business to include car radios. However, in July, he was perturbed to discover that the Lemon Mobile Phone Company had just opened a Lemon Shop in the same street. He also heard from a friend that Kevin had known of this potential development in May, when an item about the new Lemon Shop appeared in the local paper.

Mr Justice Parrot in the High Court held that

(i) Kevin Thompson had not made an actionable misrepresentation by stating there were no other mobile phone shops in the area because when the statement was made it was true. When Kevin heard that the Lemon Mobile Phone Company were going to open a shop he was not under a duty to communicate this fact to Mike Walters because there were merely plans reported in the press. These plans might not come to fruition (With v O’Flanagan applied). Mr Justice Parrot found as a fact that Kevin Thompson knew of the plans to open a shop.

(ii) Furthermore, even if he was wrong on the first point, it was not possible for

Mike to rescind his contract as changes had been made to the property. Although these changes were relatively minor the essential character of the shop had changed with the sale of car radios. Rescission was barred by affirmation (Long v Lloyd applied) and “retitutio in intregrum” impossible (Erlanger v New Sombrero Phosphate applied).

Mike Walters wishes to appeal to the Moot Court of Appeal.

Senior counsel should take point (i) and junior counsel should take point (ii)


11

MOOT FINAL

Matt was interested in buying the freehold of a café bar from Alan. Alan told him that the bar was a successful one occupied by Malcolm under a long-term tenancy. He added that Malcolm was a “reliable and desirable” tenant. Malcolm ran the bar so there was very little trouble, he had a strict policy on drugs and refusing to serve people who he considered had had enough to drink. At that time the bar was fairly popular but Malcolm was often behind with paying the rent.

He went on to state that a housing association was planning to convert the old factory premises opposite the bar into student flats (this was true) and that this would result in additional custom for the bar. However he omitted to tell Matt that planning permission had been granted for a large new Comedy bar to be converted from a shop two doors from the bar.

In July Matt purchased the freehold from Alan, with Malcolm as his tenant. In September Malcolm was adjudged bankrupt and Matt, unable to find another tenant, took over the business himself. He discovered the true position with the rental payments, but he found that by keeping the bar open for longer hours and by building an extension to increase the bar area he was able to keep the business going. However, in December the new Comedy bar opened two doors from Matt’s bar and he found that he had insufficient custom to keep the bar profitable.

Mrs Justice Witter held that

(i) There were no actionable misrepresentations as the description of Malcolm as a “reliable and desirable” tenant and the statement about additional custom from the student flats were merely matters of opinion and therefore not actionable (Bisset v Wilkinson applied)

(ii) By keeping the bar open longer hours and extending the seating area he was not able to return the café bar to Alan in the same state as he had received it so rescission was barred (Erlanger v New Sombrero Phosphate applied) and he had affirmed the contract (Long v Lloyd) by making these alterations.

Matt wishes to appeal to the Moot Court of Appeal.

Senior counsel should take point (i) and junior counsel should take point (ii)


12

MISREPRESENTATIONA misrepresentation may be defined as an untrue statement of existing or past fact made by one party to the other before or at the time of making the contract, which is intended to and does induce the other party to enter into the contract. The person making the representation is known as the representor and the person to whom it is made is known as the representee.

A The statement must be factualThe first point to note is that the statement must be one of fact - this requirement generally excludes the following types of statement:-

1. Mere commendatory puffs

Commendatory statements, such as advertisements that Persil washes whiter are not regarded as material statements of fact. They are merely sales talk and would not be taken seriously by a buyer. Where does the borderline between permissible commendation and actionable false assertion lie? In Dimmock v Hallett (1866) 2 Ch App 21 land was described as ‘fertile and improvable’. This statement was held by the Court of Appeal to be merely sales talk and not a misrepresentation.

2. Statements of opinion/forecasts

Beyond the area of ‘sales talk’, statements may be made which, seemingly, have a verifiable factual content, yet are hedged around with qualifications such as “I think” or “I believe” or in some other way indicate that they are not so much positive fact but merely statements of belief. An assertion of belief alone is not actionable. However the issue as to whether a statement is merely one of belief/opinion is sometimes more complex than a simple investigation of whether cautionary or qualifying words are used.

(i) If neither party has special skill/knowledge and both are aware of this, then a seemingly unequivocal statement of fact MAY be viewed as merely a statement of belief.

BISSET v WILKINSON [1927] AC 177; [1926] All ER Rep 343 (PC)

The owner of a sheep farm in New Zealand stated that it would ‘carry’ 2,000 sheep. The land had hardly been used for sheep farming. When the respondents were sued for instalments of the purchase price their defence was that the statement was a misrepresentation. The case was heard by the Privy Council on appeal from the New Zealand courts. The Privy Council held that the statement was merely an opinion as the seller did not have experience of sheep farming on the land and therefore the statement was not a misrepresentation.


13

Lord Merrivale said, “That land as a distinct holding had never constituted a sheep-farm….the defendants were not justified in regarding anything said by the plaintiff as to the carrying capacity as being anything more than an expression of his opinion on the subject…”

(ii) By way of contrast, a seeming statement of opinion may be a misrepresentation if, by implication, it involves a statement of fact.

(a) A person who states an opinion always implies that he genuinely holds that opinion. If someone states an opinion which he does not hold he is misrepresenting the state of his mind.

EDGINGTON v FITZMAURICE (1885) 29 ChD 459; [1881–5] All ER Rep 59 (CA)

The directors of a company issued a prospectus inviting the public to invest in return for debentures. Untrue statements were made that the money raised would be used for expansion of the company: to alter buildings, buy horses and transport. In fact the intention was to use the money to pay off the company’s debts. The Rev. Edgington was seeking rescission i.e. the return of the £4,000 that he had invested. The Court of Appeal held it was a misrepresentation despite being a statement about the future because it was honestly held.

Bowen LJ said that “ the state of a man’s mind is as much a fact as the state of his digestion.”

(b) Where the party who states the opinion possesses greater knowledge or expertise than the other, he is taken to represent (by implication) such facts as anyone would assume to be the necessary factual basis of such opinion. If such facts do not exist there is a misrepresentation.

SMITH v LAND AND HOUSE PROPERTY (1884) 28 ChD 7 (CA)

The plaintiffs advertised a hotel for sale. The particulars stated that it was let to “Mr Frederick Fleck, (a most desirable tenant)” at a rent of £400 a year. Mr Fleck was in arrears with his rent and he had been threatened with seizure of his goods to recoup the arrears. Despite the statement being an opinion it was held to be a misrepresentation.

Bowen LJ said that where “the facts are equally known to both parties, what one says to the other is frequently nothing but an expression of opinion. But if the facts are not equally known to both sides, then a statement of opinion by one who knows the facts best involves very often a statement of material fact, for he impliedly states that he knows facts which justify his opinion.”


14

3. Statements as to future intentions

Statements of future intentions are generally not actionable. However, if it can be proved that the representor never intended to carry out the promise at the time of making the statement, then there is a statement of fact (a misstatement of the implied state of the representor’s mind).

EDGINGTON v FITZMAURICE (1885) 29 ChD 459; [1881-5] All ER Rep 59 (CA) see above.

B Silence (non-disclosure) and misrepresentation

Generally, a contracting party is under no duty to disclose a material fact known to him, but not to the other party.

KEATES v CADOGAN (1851) 138 ER 234

The defendant let a house that he knew was unsafe and unfit for human habitation. He was not liable for keeping silent about the condition of the property when he was sued by the tenant.

However

there are several exceptions or apparent exceptions to this rule:-

1. A person may make a ‘representation’ by conduct so if a seller of goods does some positive act, to conceal deliberately, defects in the goods, he may be guilty of a misrepresentation

SCHNEIDER v HEATH (1813) 170 ER 1462 where a ship was sold “to be taken with all faults”; despite this the vendor was held liable because he knew of secret defects and used means - keeping her constantly afloat - to hide that the bottom was worm-eaten and the keel was broken.

2. ‘Half-true’ statements

These are statements which are literally true but by omitting certain facts the true statement made is misleading.

DIMMOCK v HALLETT (1866) 2 Ch App 21 (see also above) land for sale was described as, “let to H...” and another farm as “Let to W at ....” Both these statements were true however the tenants had given notice to quit. It was held that the statement that the farms were let was a misrepresentation.

An interesting recent case concerned the Spice Girls.


15

SPICE GIRLS LTD v APRILIA WORLD SERVICES BV [2002] EWCA Civ 15; [2002] All ER D 190 (CA)

Sponsorship consultants working for the Spice Girls approached Aprilia (also spelt Aprillia) who are Italian manufacturers of motorbikes and scooters with a view to Aprilia sponsoring a World Tour by the pop group. The agreement was made on March 4th 1998, the terms included that the Spice Girls would film a commercial, there would be a “Spice Sonic Scooter” etc. The film was shot on May 4th. However on March 3rd Geri Halliwell had told the other members of the group that she was thinking of leaving and she finally left on May 27th. The Spice Girls sued for non-payment of sponsorship fees and non-delivery of a scooter and two motorbikes. The defendants successfully argued that the group made a misrepresentation by conduct that the membership of the group was not about to change. 3. Changed Circumstances

If a statement made in negotiations is true when it is made but subsequently, before the contract is finalised, becomes untrue the representor is under a duty to correct the statement. (The representor must know that the statement has become untrue.)

WITH v O’FLANAGAN [1936] Ch 575; [1936] 1 All ER 727; 80 SJ 285 (CA).

O’Flanagan told With in January that the medical practice that he was selling brought in £2,000 a year. The court regarded this statement as true when it was made. When the practice was sold to With in May most of the patients had gone elsewhere because of O’Flanagan’s illness. It was held that O’Flanagan was under a duty to inform With of the change in circumstances.

Romer LJ “…If A with a view to inducing B to enter into a contract makes a representation as to a material fact, then if at a later date and before the contract is actually entered into, owing to a change in circumstances, the representation then made would to the knowledge of A be untrue and B subsequently enters into the contract in ignorance of that change in circumstances and relying upon that representation, A cannot hold B to the bargain.”

C Inducement and materialityA representation has no effect on a contract, unless it was intended to cause and has in fact caused the representee to enter the contract. Whether there was such inducement (and consequent reliance on the representation) is a question of fact in every case.


16

SMITH v CHADWICK (1884) 9 App Case 187; [1881-5] All ER Rep 242

The plaintiff purchased shares in a company but later tried to rescind the contract because the company prospectus contained a false statement that Mr Grieve (an important person at the time) was on the Board of Directors. The plaintiff admitted in court that whether or not Mr Grieve was on the Board had not influenced him in his decision to buy shares. The court held that rescission should not be granted.

However, a few situations can give rise to difficulty

1.The representee is given an opportunity to discover the truth, but fails to take the opportunity

The general rule is that (nevertheless) he can rely on the misrepresentation, even is the misrepresentation was innocent.

REDGRAVE v HURD (1881) 20 ChD 1 [1881-5] 2 All ER Rep 77 (CA)

The plaintiff was a solicitor who was planning to retire and put his practice and his house on the market. He told the defendant that the practice brought in £300 a year. He showed the defendant summaries for three years which demonstrated that there was business of just under £200 a year, the rest he said was in a bundle of papers which the defendant did not examine. In fact there was virtually no additional business in the bundle of papers. The defendant agreed to purchase the house and practice for £1,600 and paid a deposit of £100. The defendant found out the truth and refused to complete the contract. The plaintiff sued for specific performance (that the contract should go ahead as agreed) and the defendant countered with alleging a misrepresentation. The Court of Appeal held that there had been an innocent misrepresentation (i.e. not fraudulent) and that rescission should be granted (i.e. the deposit of £100 returned). The fact that the defendant did not check the bundle of papers indicated that the statement, that the additional business was £100 a year, induced him to enter the contract.

Jessel MR “… If a man is induced to enter a contract by a false representation it is not sufficient answer to him to say, ‘If you had used due diligence you would have found out that the statement was untrue. You had the means afforded you of discovering its falsity, and did not choose to avail yourself of them’….Nothing could be plainer….that the effect of a false representation is not got rid of on the ground that the person to whom it was made has been guilty of negligence. One of the most familiar instances in modern times is where men issue a prospectus in which they make false statements of the contracts made before the formation of a company, and then say that the contracts themselves may be inspected at the offices of the solicitors. If has always been held that those who accepted those false statements as true were


17

not deprived of their remedy merely because they neglected to go and look at the contracts. ”

2. The representee tests for accuracy but fails to discover the truth

PEARSON & SON LTD v DUBLIN CORPORATION [1907] AC 351 (HL) is perhaps authority for the proposition that if a misrepresentation is fraudulent the representee’s test for accuracy will not prevent reliance on the misrepresentation. It is not clear from the report that the representee did check, but Lord Loreburn stated “no one can escape liability for his own fraudulent statement by inserting in a contract a clause that the other party shall not rely upon them.”

But, where the misrepresentation is not fraudulent, but merely negligent, and even more where it is wholly innocent normally the representee’s test for accuracy will preclude reliance on the misrepresentation (unless the test is so brief that reliance on the statement is still a reasonable inference).

3. The representee asks a third party to verify the representation and the third party fails to discover the truth

In ATTWOOD v SMALL (1838) 7 ER 684 (HL) a vendor selling a mine made untrue statements of its earning capacity which were not fraudulent. The purchaser appointed experts to check the statements. The experts visited the mine, they were given facilities to check and they reported that the statements were true. The House of Lords held there was no fraud and that the purchaser was not induced by the vendor’s statements. The representee had relied on the experts rather than the representor. It is not clear whether the decision would have been the same if the statements had been fraudulent. Presumably on the tenuous authority of Pearson v Dublin Corporation it would not.

4. There is more than one inducement/several things are relied upon

A person who relies on a misrepresentation can claim relief even if he also relied on other inducements.

So in EDGINGTON v FITZMAURICE (1885) 29 ChD 459; [1881-5] All ER Rep 59 (CA) where a claimant was induced to take debentures in a company, partly because of a mis-statement in the prospectus and partly because of his erroneous belief that the debenture holders would have a charge over the company’s property, it was held that there was an actionable misrepresentation (the facts of the case are on page 13).


18

D Remedies for misrepresentation

The effect of a misrepresentation is to make the contract VOIDABLE. The misrepresentee (the mislead party) can choose to avoid or carry on with the contract. If a contract is void the innocent party has no choice: the contract never existed and so cannot be continued. With a voidable contract if the misrepresentee chooses to avoid the contract he must give notice to the representor.

1. Rescission

The misrepresentee has the right to rescind the contract i.e. hand back the property received and to have any money paid returned. Rescission, which is an equitable remedy, puts the parties in the position they were in before the contract was formed. The right of the mislead party to rescind a voidable contract is lost by

Affirmation Restitution impossible Supervening third party rights Lapse of time

These are known as the ‘bars to rescission’.

2. Bars To Rescission

(i) Affirmation which occurs when the misled party either declares his intention to proceed with the contract or does some act from which such an intention can unequivocally be inferred, after he has full knowledge of the facts and of the misrepresentation.

LONG v LLOYD [1958] 1 WLR 753; [1958] 2 All ER 402 (CA)

The claimant purchased a lorry which was falsely (but not fraudulently) represented as being in exceptional condition. On its first journey several faults (dynamo ceased to function, leaking oil seal and cracked wheel) were discovered; when they were drawn to the attention of the defendants they offered to pay half the cost of the repairs and the claimant accepted. The lorry was then taken on a second journey and further faults found and an expert described it as unroadworthy.

Note: In 1958 the claimant could not obtain damages in lieu of rescission.


19

Pearce LJ: “The right to rescind .... on the ground of innocent misrepresentation is barred by acceptance of the goods .... the place of delivery is the proper place for examination and acceptance .... the plaintiff [could] have the lorry examined by an expert .... However certain representations could not be ascertained except by user .... the plaintiff should have a reasonable time to test it”.

Pearce LJ concluded that the agreement over the repairs and the second journey amounted to affirmation.

In addition it appears that there can be no affirmation if the representee was unaware that there was a right to rescind:-

PEYMAN v LANJANI [1985] 2 WLR 154; [1984] 3 All ER 703 (CA)

Lanjani had a defective title to a restaurant lease as someone else had impersonated him in dealings with the landlord. (Lanjani was scruffy and spoke no English.) Peyman agreed to purchase the lease from Lanjani for £55,000 and then found out about the impersonation and the defective title. The solicitor who was acting for both Lanjani and Peyman advised Peyman to continue. Peyman paid £10,000 and went into possession. He then went to another solicitor who advised him to rescind. The Court of Appeal (reversing the first instance court) held that the misrepresentee can only choose between affirmation and rescission if they are aware that they have the right to rescind.

Slade LJ “ If A wishes to allege that B, having had a right of rescission, has elected to affirm the contract, he should in his pleadings, so it seems to me, expressly allege B’s knowledge of the relevant right to rescind, since such knowledge will be an essential fact on which he relies.” (ii) Restitution Impossible

This bar is usually known by the Latin : “restitutio in integrum” is impossible. Often precise restitution is impossible as the property has undergone some change. If restitution is substantially possible the court will order rescission together with a monetary payment to compensate for the change: -

ERLANGER v NEW SOMBRERO PHOSPHATE CO. (1878) 3 App Cas 1218; [1874 – 80] All ER Rep 271 (HL)

The plaintiffs purchased a phosphate mine which they worked for some time. They then discovered the misrepresentation and attempted to rescind despite precise restitution being impossible because the mine had been worked. An order for rescission was made together with an order to account for the profits made.


20

Lord Blackburn stated at page 1278:

[Equity could] “…take account of profits and make allowance for deterioration. And I think the practice has always been …to give this relief whenever… it is practically just though it cannot restore the parties precisely to the state they were in before the contract”.

(iii) Supervening third party rights: If a bona fide third party acquires the property for value then the right to rescission is lost.

(iv) Lapse of time

For a fraudulent misrepresentation the period of time is calculated from when the representee learnt the truth. For non-fraudulent misrepresentations time runs from the date of the contract.

LEAF v INTERNATIONAL GALLERIES [1950] 2 KB 86; [1950] 1 All ER 693 (CA)

Leaf purchased a painting of Salisbury Cathedral from International Galleries for £85. The Galleries had innocently misrepresented that it was painted by Constable. Five years later when Leaf tried to sell the painting at Christies he found out that it was not painted by Constable. He claimed rescission (not damages for breach of contract). The Court of Appeal held that a delay of five years barred rescission.

Lord Denning said “…a contract for the sale of goods may be rescinded … for innocent misrepresentation, the claim is barred in this case … The buyer has accepted the picture. He had ample opportunity for examination in the first few days after he had bought it… Yet he kept it all this time. Five years have elapsed without any notice of rejection. In my judgement he cannot now claim to rescind. His only claim… was one for damages, which he has not made in this action.”

3. Damages for misrepresentation

All the moots raise the issues concerning rescission and bars to rescission and only require an outline knowledge of damages.

The damages available depend to some degree, on the type of misrepresentation:

Fraudulent Negligent Innocent


21

(i) Fraudulent Misrepresentation

In DERRY v PEEK (1889) 14 App Cas 337; [1886-90 All ER Rep 1 (HL)

Lord Herschell said, “fraud is proved when it is shown that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false”.

If the representee can prove fraud, in addition to rescission, (provided it is not barred) he can also claim damages for the tort of deceit. The amount of damages is calculated on “out of pocket losses” (expenses) rather than loss of profits. Damages for fraud are generally assessed on a generous basis.

DOYLE v OLBY [1969] 2 QB 158; [1969] 2 All ER 119; [1969] 2 WLR 673 (CA)

The defendant advertised the sale of his ironmongery business stating that the turnover was £27,000. The claimant was shown copies of the accounts and was told it was two-thirds retail and one-third wholesale and all “over the counter”. In fact the business employed a travelling salesman who brought in half the business. It was conceded that fraudulent misrepresentations had been made. The Court of Appeal held that the claimant could recover all the losses flowing from the fraudulent statements.

Lord Denning said “In fraud… the defendant is bound to make reparation for all the actual damage directly flowing from the fraudulent inducement. The person who has been defrauded is entitled to say: ‘I would not have entered into this bargain at all but for your representation. Owing to your fraud, I have not only lost all the money I paid you, but, what is more, I have been put to a large amount of extra expense as well… All such damages can be recovered: and it does not lie in the mouth of the fraudulent person to say that they could not reasonably have been foreseen.”

(ii) Damages for negligent misrepresentation

(a) Based on the previous cases (the common law)

Originally there was no remedy in damages for any type of non-fraudulent misrepresentation. This remained the position until the House of Lords’ case of

HEDLEY BYRNE v HELLER [1964] AC 465;[1963] 2 All ER 575;[1963] 3 WLR 101

which created liability for negligent statements (and consequently a right to claim damages). In the case, Hedley Byrne (HB), who were advertising agents, asked their bank, the National Provincial, to obtain a status report on their clients, Easipower Ltd (E). The bank contacted Heller & Partners Ltd.,


22

who were E’s bankers, and they replied “without responsibility” that E was creditworthy. Relying on this statement HB booked advertising space and took responsibility for payment. E went into liquidation and HB lost £17,000. It was held that damages could be awarded for a negligent mis-statement but the duty of care was excluded by the disclaimer (since the Unfair Contract Terms Act 1977 was passed such disclaimers may be affected by s.13).

However, the burden of proving negligence was on the representee and it was necessary to show there was a special relationship, so that his reliance on the representor was justified, i.e that the representor owed the representee a duty of care. It is unclear the precise boundaries of a “special relationship”; it clearly includes the relationship professional advisers such as solicitors and accountants have with their clients. It may extend further than this to encompass anyone who possesses special expertise and knows that the other party will rely on their advice.

(b) Negligent Misrepresentation : damages under the Misrepresentation Act 1967 s.2(1)

Section 2(1) states

“Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true.”

The burden of disproving negligence is clearly upon the representor and it is not easy to discharge it – see

HOWARD MARINE v OGDEN [1978] 2 All ER 1134.

HM during negotiations told O that the carrying capacity of barges was 1,600 tonnes. This statement, based on a recollection of an incorrect figure in Lloyd’s Register, was made honestly but was wrong. The correct figure, 1,195 tonnes, was given in the shipping documents. O used the barges but the work was held up because of their limited carrying capacity. O refused to pay the hire charge and when sued, counter-claimed for misrepresentation under s2(1) Misrepresentation Act 1967.

Held: that O were successful as HM had not established they had reasonable grounds for the statement that the carrying capacity was 1,600 tonnes.

Section 2(1) states that where a person has made a negligent misrepresentation they shall be “SO LIABLE” as if the misrepresentation had been made fraudulently. In ROYSCOT TRUST v ROGERSON [1991] 3 All ER


23

294 it was held that the damages for a negligent misrepresentation should be calculated in the same way the damages for a fraudulent misrepresentation i.e. all the losses that flowed from entering the contract.

(iii) Damages for wholly innocent misrepresentations

Damages OR rescission will be awarded

Section 2(2) Misrepresentation Act 1967 provides

“Where a person has entered into a contract after a misrepresentation has been made to him otherwise than fraudulently, and he would be entitled, by reason of the misrepresentation, to rescind the contract, then, if it is claimed in any proceedings arising out of the contract, that the contract ought to be or has been rescinded, the court of arbitrator may declare the contract subsisting and award damages in lieu of rescission, if of opinion that it would be equitable to do so, having regard to the nature of the misrepresentation and the loss that would be caused by it if the contract was upheld, as well as to the loss that rescission would cause to the other party. “


Documents

Mootinghandbook13 - De Montfort University · Web viewWhether there was such inducement (and consequent reliance on the representation) is a question of fact in every case. SMITH