Royscot Trust Ltd v Rogerson
| Royscot Trust Ltd v Rogerson | |
|---|---|
 | |
| Court | Court of Appeal |
| Decided | 21 March 1991 |
| Citation(s) | [1991] EWCA Civ 12, [1991] 2 QB 297; [1991] 3 WLR 57; [1992] RTR 99 |
| Court membership | |
| Judge(s) sitting | Balcombe and Ralph Gibson LJJ |
Royscot Trust Ltd v Rogerson [1991] EWCA Civ 12 is an English contract law case, concerning the Misrepresentation Act 1967 and the extent of damages available under s 2(1) for negligent misrepresentation. It 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.
Facts
Andrew Rogerson wanted to get a second hand Honda Prelude on hire purchase.[1] He went to see the car dealer, Maidenhead Honda Centre Ltd. They agreed to sell Mr Rogerson a car for £7600. Mr Rogerson paid a £1200 deposit. To finance the rest, Mr Rogerson got the help of a finance company called Royscot Trust Ltd. On Mr Rogerson's behalf, Maidenhead did the application forms. But it falsely stated (i.e. misrepresented) that the cost of the car was £8000 and the deposit being paid was £1600. Royscot approved the loan. Had accurate figures been stated, Royscot would not have done this as its policy was only to lend money for hire purchase if 20% of the total cost was paid in the deposit (1200/7600 = 15.7%).
Mr Rogerson started to pay off his instalments, but subsequently ran into difficulties with money. In August 1987 he sold the car off, dishonestly, as he knew it was not allowed under the terms of the hire purchase agreement. He informed the finance company of this in August 1988, and stopped paying instalments in September 1988, with £3,625·24 left to pay.
In order to recover its losses, Royscot sued the car dealer, Maidenhead Honda Centre Ltd, alleging that the company's reliance upon the garage's innocent misrepresentation (fraud was not mentioned) induced it to enter into the hire purchase contract. It argued that, had the car dealer not given the wrong figures, it would never have entered the credit agreement, and therefore the subsequent loss was the car dealer's fault. The car dealer countered that the real cause of Royscot's loss was Mr Rogerson's dishonest sale of the car, because if he had not sold it, they would be entitled to repossession and discharge of their debt that way. The car dealer argued that Mr Rogerson's independent wrongful act broke the chain of causation between its misrepresentation and Royscot's loss.
The court had to consider whether under the Misrepresentation Act 1967, s.2(1), a misrepresentee is liable for all consequences of a false statement (as in a common law action for fraud), or if Mr Rogerson's independent act broke the necessary chain of causation (as in a common law action for negligence).
Judgment
Balcombe LJ and Ralph Gibson LJ held that for negligent misrepresentation under s.2(1), the correct measure of damages was tortious measure, and the same as that for the tort of deceit. The car dealer was liable for all the consequences of his misrepresentation, and therefore had to pay off the debts owed to Royscot Trust Ltd. In any case, Mr 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:
| “ | The first main issue before us was: accepting that the tortious measure is the right measure, is it the measure where the tort is that of fraudulent misrepresentation, or is it the measure where the tort is negligence at common law? The difference is that in cases of fraud a plaintiff is entitled to any loss which flowed from the defendant's fraud, even if the loss could not have been foreseen: see Doyle v Olby (Ironmongers) Ltd [1969] 2 Q.B. 158 . In my judgment the wording of the subsection is clear: the person making the innocent misrepresentation shall be "so liable," i.e., liable to damages as if the representation had been made fraudulently. This was the conclusion to which Walton J. came in F. & B. Entertainments Ltd. v. Leisure Enterprises Ltd. (1976) 240 E.G. 455 , 461. See also the decision of Sir Douglas Frank Q.C., sitting as a High Court judge, in McNally v. Welltrade International Ltd. [1978] I.R.L.R. 497 . In each of these cases the judge held that the basis for the assessment of damages under section 2(1) of the Act of 1967 is that established in Doyle v Olby (Ironmongers) Ltd This is also the effect of the judgment of Eveleigh L.J. in Chesneau v. Interhome Ltd. already cited: "By 'so liable' I take it to mean liable as he would be if the misrepresentation had been made fraudulently."
This was also the original view of the academic writers. In an article, "The Misrepresentation Act 1967" (1967) 30 Modern Law Review 369 by P. S. Atiyah and G. H. Treitel, the authors say, at pp. 373-374:
Professor Treitel has since changed his view. In Treitel, The Law of Contract, 7th ed. (1987), p. 278, he says:
The only authority cited in support of the "preferable" view is Shepheard v. Broome [1904] A.C. 342 , a case under section 38 of the Companies Act 1867, which provided that in certain circumstances a company director, although not in fact fraudulent, should be "deemed to be fraudulent." As Lord Lindley said, at p. 346: "To be compelled by Act of Parliament to treat an honest man as if he were fraudulent is at all times painful," but he went on to say:
The House of Lords so held. It seems to me that that case, far from supporting Professor Treitel's view, is authority for the proposition that we must follow the literal wording of section 2(1), even though that has the effect of treating, so far as the measure of damages is concerned, an innocent person as if he were fraudulent. Chitty on Contracts, 26th ed. (1989), vol. 1, p. 293, para. 439, says:
No authority is cited in support of that proposition save a reference to the passage in Professor Treitel's book cited above. Professor Furmston in Cheshire, Fifoot and Furmston's Law of Contract , 11th ed. (1986), p. 286, says:
The suggestion that the "fiction of fraud" theory is misconceived occurs at p. 271, in a passage which includes:
With all respect to the various learned authors whose works I have cited above, it seems to me that to suggest that a different measure of damage applies to an action for innocent misrepresentation under the section than that which applies to an action for fraudulent misrepresentation (deceit) at common law is to ignore the plain words of the subsection and is inconsistent with the cases to which I have referred. In my judgment, therefore, the finance company is entitled to recover from the dealer all the losses which it suffered as a result of its entering into the agreements with the dealer and the customer, even if those losses were unforeseeable, provided that they were not otherwise too remote. If the question of foreseeability had been the only issue in this appeal, the judgment so far would have rendered it unnecessary to decide whether, in the circumstances of the present case, the wrongful sale of the car by the customer was reasonably foreseeable by the dealer. Since the judge did not expressly deal with this point in his judgment, it might have been preferable that we should not do so. Nevertheless there is a separate issue whether the wrongful sale of the car was novus actus interveniens and thus broke the chain of causation, and the reasonable foreseeability of the event in question is a factor to be taken into account on that issue. Accordingly, it is necessary to deal with this matter. Mr. Kennedy, for the dealer, submitted that while a motor car dealer might be expected to foresee that a customer who buys a car on hire-purchase may default in payment of his instalments, he cannot be expected to foresee that he will wrongfully dispose of the car. He went on to submit that, in the particular circumstances of this case, where the customer was apparently reputable, being a young married man in employment, it was even less likely that the dealer could have foreseen what might happen. There appears to have been no oral evidence directed to this particular point. In my judgment this is to ignore both the reality of the transaction and general experience. While in legal theory the car remains the property of the finance company until the last hire-purchase instalment is paid, in practice the purchaser is placed in effective control of the car and treats it as his own. Further, there have been so many cases, both civil and criminal, where persons buying a car on hire-purchase have wrongfully disposed of the car, that we can take judicial notice that this is an all too frequent occurrence. Accordingly I am satisfied that, at the time when the finance company entered into the agreements with the dealer and the customer, it was reasonably foreseeable that the customer might wrongfully sell the car. Mr. Kennedy's next submission was that the customer's wrongful sale of the car was novus actus interveniens. This issue was considered by the judge, although the brief note of his judgment on this point is corrupt and is not agreed by counsel. It is implicit in his decision to award £1,600 damages to the finance company that the sale was not novus actus interveniens; otherwise on the figures in this case he would have been bound to find that the finance company had suffered no loss. However, the judgment contains no indication of how he came to that conclusion. In the present case the customer was a free agent and his act in selling the car was unlawful. Nevertheless neither of these facts is conclusive in determining whether the sale of the car was a novus actus sufficient to break the chain of causation: see generally Clerk & Lindsell on Torts, 16th ed. (1989), pp. 81-86, paras. 1-117 to 1-121 and McGregor on Damages , 15th ed. (1988), pp. 92-94, paras. 152-156. However, if the dealer should reasonably have foreseen the possibility of the wrongful sale of the car, then that is a strong indication that the sale did not break the chain of causation. As Winn L.J. said in Iron and Steel Holding and Realisation Agency v. Compensation Appeal Tribunal [1966] 1 W.L.R. 480, 492:
I doubt whether further citation of authority will be helpful; in this field authority is almost too plentiful. For the reasons I have already given, in my judgment the dealer should reasonably have foreseen the possibility that the customer might wrongfully sell the car. In my judgment, therefore, the sale was not novus actus interveniens and did not break the chain of causation. Mr. Kennedy's final submission was that the normal rule is that the plaintiff's loss must be assessed as at the date of his reliance upon the misrepresentation; since the finance company paid £6,400 to the dealer and in return acquired title to a car which was worth at least that sum, its loss assessed at that date was nil. This submission again falls into the error of treating the transaction according to its technicalities - that the finance company was interested in purchasing the car. That was not the reality: the finance company was interested in receiving the totality of the instalments from the customer. Once the transaction is looked at in this way the authorities on which Mr. Kennedy relied to support this submission, being all concerned with misrepresentations leading to the acquisition of chattels, can be seen to be of little assistance. But even in such a case the rule is not a hard and fast one - see the recent case of Naughton v. O'Callaghan [1990] 3 All E.R. 191. So I reject this submission also. Accordingly, I would dismiss the dealer's appeal. I would allow the finance company's cross-appeal, set aside the judgment of 22 February 1990, and direct that in its place judgment be entered for the finance company against the dealer in the sum of £3,625·24 together with interest. The finance company accepts that it will have to give credit for any sums that it may receive from its judgment against the customer. |
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See also
- Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158
Notes
- ↑ See, Hire-Purchase Act 1964