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#14768 - Misrepresentation 1 Actionability - GDL Contract Law

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CONTRACT LAW

MISREPRESENTATION 2: CATEGORIES AND REMEDIES

UNAMBIGUOUS: No liability if claimant has placed an unreasonable construction on the representation (MCINERNY V LLOYDS BANK LTD)
FALSE: Statement must be substantially incorrect (AVON INSURANCE PLC V SWIRE FRASER LTD)
STATEMENT OF LAW: false statement of law is actionable for misrep (PANKHANIA V HACKNEY LBC)

STATEMENT OF FACT

  • Statement of fact is a statement asserting a given state of affairs (KLEINWORT BENSON V MALAYSIA MINING CORP)

  • Statement of fact through words or conduct (GORDON V SELICO, SPICE GIRLS V APRILLA)

  • Statement of opinion is not a statement of fact (BISSETT V WILKINSON)

Exception: Opinion given by someone with greater knowledge than C (SMITH V LAND AND HOUS PROPERTY)

Exception: Opinion given by an expert (ESSO PETROLEUM V MARDON)

  • Statement of future intention is not a statement of fact (BEATTIE V EBURY)

Exception: Dishonest statements made with no intent to follow through (EDGINGTON V FITZMAURICE)

  • No duty to inform other party of change of intention (WALES V WADHAM)

  • Silence is not a statement of fact (KEATES V EARL OF CADOGAN, SYKES V TAYLOR-ROSE)

Exception: Half-truths (DIMMOCK V HALLETT, NOTTS PATENT BRICK & TILE V BUTLER)

Exception: Continuing representation (WITH V O’FLANAGAN)

Exception: Uberrimae Fidei (HOOD V WEST END MOTOR)
ADDRESSED TO THE MISLED PARTY: directly or through a third party (COMMERCIAL BANKING CO. OF SYDNEY V RH BROWN & CO.)

MATERIALITY + INDUCEMENT

  • Material= inducement (SMITH V CHADWICK)

Exceptions: D can prove C was not subjectively induced (MUSEPRIME V ADHILL)

  • Immaterial = no inducement

Exceptions: C can prove they were induced – subjective (MUSEPRIME V ADHILL)

  • Misrep need not be the only inducement (EDGINGTON V FITZMAURICE)

  • Misrep must be one of the inducements (JEB FASTNERS V MARKS BLOOM)

  • No inducement where C did not hear/see misrep (HORSFALL V THOMAS)

  • No inducement where claimant did not rely on misrep (SMITH V CHADWICK)

  • No general duty for C to investigate (REDGRAVE V HURD)

Exception: more commercial contracts may reasonably require investigation (SMITH V ERIC S. BUSH)

  • Partial reliance on misrep is sufficient where C has investigated (EDGINTON V FITZMAURICE)

  • No inducement if C relies on their own investigation (ATTWOOD V SMALL)

  • Investigation is ignored if misrep is fraudulent (S.PEARSON V DUBLIN CORP)
REPRESENTATIONS, TERMS AND MERE PUFF
RULE CASE

  1. MERE PUFF

A statement with no legal force whatsoever.

Mere puff is not a representation and will not qualify as a misrepresentation.

DIMMOCK V HALLETT

Vendor of land made two statements:

  1. The land was fertile and improvable.

  2. All of the farms on the land had been fully let.

Although the farms were all let at the time the statement was made the tenants had given in their notice quit.

HELD: Statement 1 was just mere puff.

Statement 2 was a misrepresentation by half-truth.

  1. TERM

A statement that is a contractual promise. A representation may become a term if the court decides it is incorporated into the contract.

If the representation is a term, there are potential claims for breach of contract and misrepresentation.

J.EVANS & SONS V ANDREA MERZARIO

P had goods transported by D for a long time. Goods were always transported on deck. D wanted to change to containers. P agreed, as long as they were still stored below deck – D agreed to do this, but did not and goods were lost.

HELD: The oral promise was a binding term that formed part of the contract. D gave the oral promise to induce the P to continue to do business with the company. The rest of the transaction continued on the basis of that promise.

  1. REPRESENTATION

A statement of fact.

A false representation will give rise to a claim in misrepresentation if it is actionable.

ELEMENTS OF AN ACTIONABLE MISREPRESENTATION – ALL MUST BE PROVEN

  1. UNAMBIGUOUS
RULE CASE

There can’t be any doubt as to what the statement means.

The representor will not be liable if the representee has placed an unreasonable construction on the representation.

MCINERNY V LLOYDS BANK LTD

C wasn’t going to do business with Mackay unless Mackay’s bank provided a guarantee. D wrote to C stating that they couldn’t provide a guarantee and the arrangements ‘should be sufficient’ for C’s purposes. Mackay did not pay and C sued D on the basis that the letter was a negligent misrepresentation which suggested that D would step in and pay Mackay’s liabilities.

HELD: C had placed his own interpretation on the letter which on a reasonable construction did not give the assurances that C had asked for. The statement was not a guarantee, it was ambiguous and was not a misrepresentation.

  1. FALSE
RULE CASE

A statement is false if it is not substantially correct.

“A representation may be true without being entirely correct, provided it is substantially correct…”

  • MR JUSTIC RIX

AVON INSURANCE PLC V SWIRE FRASER LTD

C = insurers, D = insurance brokers authorised by C to issue stop loss policies on their behalf. D showed C a presentation, where it was stated that each of the names who proposed to take an insurance policy from C would be individually assessed by the leading underwriter. He didn’t assess each name, C claims misrepresentation.

HELD: D’s statement was substantially true and therefore not a misrepresentation.

  1. STATEMENT OF FACT OR LAW
RULE CASE EXCEPTIONS CASE

Statement of law: a status about the legal status of someone/something.

A misrepresentation of law may be actionable.

PANKHANIA V HACKNEY LBC

Buyer of a car park was told by Hackney LBC that the car park was let out to a tenant on a contractual licence. In fact, it was occupied under a protected tenancy pursuant to the Landlord & Tenant Act 1954.

HELD: The legal status of the tenancy had been misrepresented – misrepresentation of law.
Statement of fact: a statement asserting a given state of affairs, not an undertaking to do or not do something.

KLEINWORT BENSON LTD V MALAYSIA MINING CORP

C lent a subsidiary of D money on the basis that D wrote a letter stating ‘it is at all times our policy to ensure that our subsidiaries can meet its liabilities’.

Subsidiary goes under and C sues D on the basis of that statement. D said it was their policy, but isn’t any longer.

HELD: It was a statement of fact at the time and not a contractual promise – no claim for breach. Also no claim for misrepresentation because the statement was true when it was made, they’d just changed their policy.

A statement of fact can be made by conduct or words.

  • Attempts of concealment/conduct will be elevated to a statement of fact.

GORDON V SELICO LTD AND SELECT MANAGEMENTS LTD

D hired an independent contractor to get rid of some dry rot in a flat. He covered it up instead of eradicating it. C then purchased flat and discovered the concealed rot.

HELD: By covering up the dry rot, the independent contractor had knowingly made a false representation to C.

SPICE GIRLS LTD V APRILLA WORLD SERVICE

D sponsored a Spice Girls tour in return for some promotional work, which included a photo shoot. Group already knew Geri was planning on leaving before finishing the photo shoot.

HELD: The Spice Girls had made a misrepresentation by conduct because they’d given D the impression that all five of them were committed to the promotional work and there none had an existing, declared intention to leave the group.

A statement of opinion is not a statement of fact.

  • A layman’s opinion with no greater knowledge than addressee cannot be a statement of fact.

BISSETT V WILKINSON

Vendor of a sheep farm told purchaser he thought the farm could hold 2,000 sheep. This turned out to be untrue.

HELD: no misrepresentation because it was the vendor’s honest opinion. Purchaser knew vendor had never farmed sheep and was expressing an opinion.

  1. Opinion with greater knowledge may be regarded as a statement of fact.

  2. Where the opinion is given by an expert, it may be regarded as a statement of fact.

  1. SMITH V LAND & HOUSE PROPERTY CORP

Contract for the sale of a hotel. Owners described a lessee as a ‘most desirable tenant’, when in fact he was in arrears and had to be pursued regularly for rent. Purchaser agreed to buy hotel, but lessee went into liquidation before the sale was completed – purchaser refused to complete sale.

HELD: Statement left the impression that the lessee was desirable to someone intending to buy a property and make a profit, i.e. someone who pays the rent on time.

Since owners had greater knowledge in this regard, so this statement of opinion was also regarded a...
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