Summery of some important cases of Misrepresentation PDF

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These are summery of some of the important cases for misrepresentation chapter. Through this one can get a clear idea of the case laws....

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MISREPRESENTATION FALSE STATEMENT Bisset v Wilkinson [1927] AC 177 Privy Council The claimant purchased a piece of farm land to use as a sheep farm. He asked the seller how many sheep the land would hold. The seller had not used it as a sheep farm but estimated that it would carry 2,000 sheep. In reliance of this statement the claimant purchased the land. The estimate turned out to be wrong and the claimant brought an action for misrepresentation. # The Privy Council held that the statement was only a statement of opinion and not a statement of fact and therefore not an actionable misrepresentation. The claimant's action was therefore unsuccessful. Esso Petroleum v Mardon [1976] QB 801 Court of Appeal 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 affect 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. # 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. STATEMENT OF OPINION Smith v Land and House Property Corp (1884) 28 Ch D 7 The claimant purchased a hotel. The seller described one of the tenants as being 'most desirable'. In fact, as the seller knew, the tenant was in arrears and on the verge of bankruptcy. This was held to be a statement of fact rather than opinion as the seller was in a position to know the facts. STATEMENT TO FUTURE INTENT Edgington v Fitzmaurice (1885) 29 Ch D 459 The claimant purchased some shares in the defendant company. The company prospectus stated the shares were being offered in order to raise money to expand the company. In fact the company was experiencing financial difficulty and the money raised from the sale of the shares was going to be used to pay the company debts. # Held: Despite the fact that the statement related to a statement of future intent, it was an actionable misrepresentation as the defendant had no intention of using the money to expand the company.

FALSE STATEMENT OF LAW Pankhania v LB Hackney [2002] EWHC 2441 The claimants purchased property induced by a representation that the current occupiers of the property were contractual licensees, whose occupation could be terminated on giving 3 months notice. In fact the current occupant was in fact a tenant protected under the Landlord and Tenant Act 1954. This was a misrepresentation as to law which had previously been assumed not to be an actionable misrepresentation through analogy with case law based on restitutionary claims for mistake of law. The rule barring recovery for mistake of law was abolished by the House of Lords in Kleinwort Benson v Lincoln County council. The High court held that actions based on misrepresentation of law could now be actionable based upon that change of law. The claimant's action was therefore successful. Silence will not generally amount to a misrepresentation: Smith v Hughes (1871) LR 6 QB 597 The claimant had purchased a quantity of what he thought was old oats having been shown a sample. In fact the oats were new oats. The claimant wanted the oats for horse feed and new oats were of no use to him. The seller was aware of the mistake of the claimant but said nothing. The claimant brought an action against the seller based on mistake and misrepresentation. Held: both actions failed. The action based on misrepresentation failed as you cannot have silence as a misrepresentation. The defendant had not mislead the claimant to believe they were old oats. The action based on mistake failed as the mistake was not as to the fundamental terms of the contract but only a mistake as to quality. Walters v Morgan (1861) 3 DF & J 718 The defendant purchased some land. The claimant wished to mine the land and produced a draft lease and pressured the defendant into signing the lease before he realised the value of the land. Once the defendant had discovered the true value, he refused to allow the defendant to mine the land. The claimant sued for breach of contract and sought specific performance. The defendant sought to have the contract rescinded for misrepresentation. Held: There was no misrepresentation since the claimant had not said anything to mislead the defendant as to the value of the land. Silence can not amount to misrepresentation. However, the court refused an order of specific performance as the claimant had sought to take advantage of the defendant’s ignorance by rushing him into signing the lease. With v O'Flanagan [1936] Ch 575 Court of Appeal The claimant purchased a medical practice from the defendant. The claimant was induced to buy the practice by the defendant's statement that the practice took £2,000 per annum. This statement was true at the time it was made. However, subsequently the defendant became ill and many patients went elsewhere. By time the sale was completed the practice was virtually worthless.

Held: Where a statement is rendered false by a change in circumstances there is a duty to disclose the change. A failure to do so will result in an actionable misrepresentation HIH Casualty and General Insurance Ltd v Chase Manhattan Bank [2003] UKHL 6 House of Lords Chase Manhattan advanced substantial sums to finance the production of a film syndicate. HIH provided insurance for the event that the film did not make enough revenue to repay the loan. Chase Manhattan made the insurance a condition of getting the loan and also specified the agent, Heath North America (HNA), that must be used to obtain the insurance. HNA obtained the insurance policies but in doing so made certain fraudulent misrepresentations and failed to disclose a report that suggested the films were unlikely to make a profit. The films did not generate sufficient revenue to cover the loan and Chase sought to claim under the insurance policy. The insurance company refused to pay out claiming to rescind the contract for misrepresentation and a failure to disclose a material factor as required under s.19 & 20 of the Marine Insurance Act 1906 (applicable to all insurance contracts not just marine insurance). S.18(3) (c) of the Act provides that the insured need not disclose information which has been waived by the insurer. The contract of insurance contained a truth of statement clause which provided: "[6] the Insured will not have any duty or obligation to make any representation, warranty or disclosure of any nature, express or implied (such duty and obligation being expressly waived by the insurers [7] and shall have no liability of any nature to the insurers for any information provided by any other parties [8] and any such information provided by or nondisclosure by other parties including, but not limited to, Heath North America & Special Risks Ltd (other than section I of the questionnaire) shall not be a ground or grounds for avoidance of the insurers' obligations under the policy or the cancellation thereof." Chase sought to rely on this clause to argue that the insurance company could not rescind the contract. Held: The clause was ineffective. The insurers were entitled to rescind the contract of insurance through both the misrepresentation and the non-disclosure. INDUCEMENT : Horsfall v Thomas [1862] 1 H&C 90 The claimant purchased a gun which had a concealed defect. His action for misrepresentation failed as he hadn't inspected the gun before purchasing it. Therefore the misrepresentation did not induce him to enter the contract as he was unaware of it. Attwood v Small [1838] UKHL J60 The claimants purchased Corngreaves estate from the defendant for £600,000. Corngreaves estate consisted of mining land, iron works and various properties including a mansion house. Many of the properties were subject to leasehold and generated income. The mines were to be worked by and

profit to go to the claimant. A preliminary agreement was made between the parties whereby the claimant agreed to purchase subject to being satisfied that the reports and accounts given by the defendant were accurate. The claimant then had his accountants and directors check out the accounts and reports who were satisfied they were accurate. The claimant then proceeded with the purchase. It then transpired that the accounts had greatly exaggerated the income generated by the estate and the claimant sought to rescind the contract based on the misrepresentations contained in the reports and accounts. Held: The claimant was unsuccessful. By getting his own experts to check out the reports he had not relied on the accounts but his own judgment.

Redgrave v Hurd (1881) 20 Ch D 1 A solicitor purchased into the partnership in the solicitors' firm. He was told the partnership had an income of £300 per year and was given the opportunity to look at the accounts. He declined the offer to check the accounts and took them at their word. In fact the income was only £200 per year. Held: He was entitled to rescind the contract as he relied on the statement. The fact that he had declined the offer to check the books reinforced rather than negated that reliance.

Important in this chapter :

Derry v Peek (1889) 5 T.L.R. 625 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) knowing it to be false, ii) without belief in its truth, or iii) recklessly, careless as to whether it be true or false....