Misrep - categories (cases) PDF

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Misrepresentation – categories CASE Derry v Peek [1889] 14 App Cas 337, 374  In a company prospectus the defendant stated the company had the right to use steam powered trams as oppose to horse powered trams. However, at the time the right to use steam powered trams was subject of approval of the Board of Trade, which was later refused. The claimant purchased shares in the company in reliance of the statement made and brought a claim based on the alleged fraudulent representation of the defendant. Held The statement was not fraudulent but made in the honest belief that approval was forthcoming. Lord Herschell defined fraudulent misrepresentation as a statement which is made either: i) ii) iii)

knowing it to be false, without belief in its truth, or recklessly, careless as to whether it be true or false.

CASE Hedley Byrne v Heller [1964] AC 465, 486  Hedley Byrne were advertising agents placing contracts on behalf of a client on credit terms. Hedley Byrne would be personally liable should the client default. To protect themselves, Hedley Byrne asked their bankers to obtain a credit reference from Heller & Partners (‘H&P’), the client’s bankers. The reference (given both orally and then in writing) was given gratis and was favourable, but also contained an exclusion clause to the effect that the information was given ‘without responsibility on the part of this Bank or its officials’. Hedley Byrne relied upon this reference and subsequently suffered financial loss when the client went into liquidation. Held

The court found that H&P’s disclaimer was sufficient to protect them from liability and Hedley Byrne’s claim failed. However, the House of Lords ruled that damage for pure economic loss could arise in situations where the following four conditions were met: (a)a fiduciary relationship of trust & confidence arises/exists between the parties; (b) the party preparing the advice/information has voluntarily assumed the risk; (c)there has been reliance on the advice/info by the other party, and (d) such reliance was reasonable in the circumstances. CASE Esso Petroleum v Mardon [1976] QB 801, 820  Mr Mardon entered a tenancy agreement with Esso Petroleum in respect of a new Petrol station. Esso's experts had estimated that the petrol station would sell 200,000 gallons of petrol. This estimate was based on figures which were prepared prior to planning application. The planning permission changed the prominence of the petrol station which would have an adverse effect on the sales rate. Esso made no amendments to the estimate. The rent under the tenancy was also based on the erroneous estimate. Consequently, it became impossible for Mr Mardon to run the petrol station profitably. In fact, despite his best endeavours the petrol station only sold 78,000 gallons in the first year and made a loss of £5,800. Held The Court of Appeal held that there was no action for misrepresentation as the statement was an estimate of future sales rather than a statement of fact. However, the claimant was entitled to damages based on either negligent misstatement at common law or breach of warranty of a collateral contract. CASE McInerny v Lloyds Bank [1974] 1 Lloyds Rep 246, 253  The defendant bank made arrangements for one party’s (T) commercial credit to facilitate the purchase of companies

belonging to another party (P). P was to take bills of exchange in instalments over six years to pay for the price of the purchase. The defendant sent a letter to T explaining the details of the transaction and sent a copy, by telex, of this letter to P. P read the letter and understood it to mean that the defendant had accepted T’s instructions in relation to the transaction. When this was not the case, P commenced an action against the defendant for breach of contract and/or negligent misrepresentation.  The issue in this circumstance was whether the telex sent to P was an enforceable representation as to the defendant’s position in the transaction. Held It was held, both at first instance and on appeal to the Court of Appeal, that the claim should be dismissed. Although the defendant should be responsible for statements made by it and although the letter sent to P and T was so badly drafted as to cause P to misunderstand its purpose, where a document is unclear, it should be given the meaning intended by the maker or the meaning that maker knows or ought to have known that the recipient would give it. On the facts here, the letter did not expressly state that the defendant had accepted T’s instructions and P should have taken it to be considered by his lawyer before relying on it. ACT s2(1) of The Misrepresentation Act 1967 2 Damages for misrepresentation  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 the facts represented were true. CASE Taberna Europe CDO II Plc v Selskabet [2016] EWCA Civ 1261 [44]  Roskilde was a Danish regional bank (now in bankruptcy). Taberna is an investment vehicle incorporated in Ireland. In December 2006, Roskilde issued Fixed/Floating Rate Dated Subordinated Callable Step-Up Notes which Taberna purchased in February 2008 on the secondary market. Roskilde’s financial position subsequently deteriorated and it was placed into bankruptcy.  Taberna issued proceedings for misrepresentation on the basis that it had been induced to purchase the Notes by a representation made by Roskilde that Roskilde’s non-performing loans had a certain value, when in fact they were worth less. Held This is a successful appeal by Roskilde of a High Court judgment in which Taberna was awarded damages for misrepresentation by Roskilde. The Court of Appeal had to consider whether the information about the amount of non-performing loans contained in an investor presentation which was originally prepared for a road show but also published on Roskilde’s website was a representation that Taberna could rely on (it was likely that Taberna obtained the presentation from the website). If that was the case, the judge had to decide whether Roskilde was entitled to rely on the disclaimer contained in the presentation (which contained duty-negating clauses and exclusion clauses). It was common ground that there was no contract between Roskilde and Taberna. The court referred back to the decision in Caparo Industries v Dickman and held that the mere fact that a document was published on a company’s website was not sufficient to create the proximity

required to give rise to a duty of care. In the particular circumstances however, where Roskilde encouraged a bank to direct Taberna to the investor presentation on the website with a view to purchasing the Notes, the High Court judge found (and the Court of Appeal confirmed) that Roskilde had deliberately made the presentation available to Taberna with a view to its relying on it for investment purposes and therefore constituted an actionable representation. CASE Startwell Ltd v Energie Global Brand Management [2015] EWHC 421 [81]  The background to the claim is that the Defendant, Mr Nabi (a franchisee of Energie) was unhappy with the service being provided by energie Fit4Less, in particular their in-house software system called “Elan”. Mr Nabi was a vocal critic within the Energie franchisee network and felt that he was being bullied and intimated by Energie’s chief executive Mr Jan Spaticchia for voicing his concerns. There was then a significant deterioration in the relationship between Mr Spaticchia and Mr Nabi. Energie eventually terminated their Franchise Agreement with Mr Nabi on 28 April 2017. Under clause 25.3 of that Franchise Agreement, Energie exercised its option to take over the lease of the club, to purchase its assets including fitness equipment and to have assigned or novated to it any other contracts.  Energie appointed three surveyors to provide opinions on the open market value of the lease. All three surveyors opined that the lease had little value and produced an “average-of-averages figure of £8,344” which was offered to Mr Nabi as the value of the lease. Mr Nabi rejected the valuations on the basis that Energie’s valuers were biased and the valuations were therefore not independent. This then led to a period where Mr Nabi continued to operate the club, even though the Franchise Agreement had been terminated (the “Interim Arrangement”). During the Interim Arrangement, Energie unilaterally ceased making payments received by Star Gym’s members,

“purportedly so that it could if and when necessary pay for the Club’s staff, members and landlord.” After several months of negotiations, whilst Energie continued to withhold Mr Nabi’s payments, the club was closed down and Mr Nabi “flipped the signs” and handed the club to a company called HRPMoon Limited, of which Mr Nabi’s wife was the sole director.  Energie Fit4Less brought a claim for breach of the Franchise Agreement, breach of confidence, procuring breaches of contract and unlawful means conspiracy. They also sought an injunction for specific performance, springboard injunctions against HRPMoon Limited, delivery up of confidential data, database, contact details and unquantified damages. Held After a trial of 7 days, Mr Rosen QC dismissed Energie’s claims for specific performance and for damages (save as to nominal damages). CASE Ticket2final OU v Wigan Athletic Football Club [2015] All ER (D) 182 [31]  Wigan made it to the FA Cup Final and lifted its first major trophy in its 81 year history. They failed to provide T2F with the tickets - tickets for Wembley finals being controlled by the Football Association not individual clubs.  Wigan argued they were not liable for their breach of the arrangements because they were entitled to terminate the contract for outstanding payments. They had sent notice to terminate to T2F by email. Held Unfortunately for Wigan, the Court held that their notice was not valid because they had not complied with the formal requirements of the notices clause, Clause 11. Clause 11 required notices to be in writing and delivered by hand or first-class post to the registered office (or sent by fax) and Court did not accept that the parties had waived that to allow notices to be given by email.

The Judge pointed out that one of the purposes of Clause 11 was to require notices, particularly ones which if not complied with might result in the contract being terminated, to be served in a particular way. In those circumstances, the party receiving the notice is in no doubt as to its importance. ACT s2(4) of The Misrepresentation Act 1967 2 Damages for misrepresentation  (4) This section does not entitle a person to be paid damages in respect of a misrepresentation if the person has a right to redress under Part 4A of the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277) in respect of the conduct constituting the misrepresentation....