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Misrepresentation

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Misrepresentation Chapter III Consumers Protection: Misrepresentation Content of this Chapter 3.0 Introduction 2 3.1 Definition 2 3.2 Elements 3 3.2.1 Statement of Fact 3 3.2.1.1 Form of Statement 3 3.2.1.2 Of Fact 4 3.2.2 False 6 3.2.3 Addressed to the Representee 6 3.2.4 Inducement 6 3.3 Types of Misrepresentation 7 3.3.1 Fraudulent Misrepresentation 7 3.3.2 Common Law Negligent Misrepresentation 8 3.3.3 Statutory Negligent Misrepresentation 8 3.3.4 Innocent Misrepresentation 8 3.4 Remedy: Rescission 9 3.4.1 Nature 9 3.4.2 Statutory Interference 9 3.4.3 Barred to rescind 9 3.5 Remedy: Damages 11 3.5.1 Fraudulent Misrepresentation 11 3.5.2 Common Law and Statutory Negligent Misrepresentation 11 3.5.3 Innocent Misrepresentation 12 3.5.4 Double damages 12 3.6 Exclusion of Liability 12 III - 1 3.0 Introduction Misrepresentation is one of the legal grounds reliable for the victim, especially vulnerable consumers, to rescind a contract as well as to claim relief and damages for loss suffered from. The concept of misrepresentation rooted from the common law principal on contract law and later tort. It is important to understand how misrepresentation is constituted at law and each type of misrepresentations. Apart from that, the interference of legislation, i.e. Misrepresentation Ordinance (Cap.284), changed position of remedies in different types of misrepresentation. The legislation also stipulates that the exclusion of liability from misrepresentation shall be subjected to reasonableness. 3.1 Definition Misrepresentation is the false statement of fact given to induce representee to enter into the contract with the presentor An actionable misrepresentation must include: (1) a statement of fact; (2) the statement of fact is false; (3) The statement has been addressed to the representee; and (4) which induced the representee to enter into the contract There is no “but for” requirement: it is not necessary to establish that a person would not have entered the contract but for the influence or misrepresentation. It is sufficient to demonstrate the party relied on the false statement (UCB v Williams [2002] EWCA Civ 555 (CA)) Contract induced by misrepresentation is voidable and thus will continue until being set aside (Clough v L & NW Rly (1871) LR 7 Ex 26) Misrepresentation can be two-parties’ situation or third-parties’ situation (see 5.4 below) III - 2 3.2 Elements 3.2.1 Statemen t of Fact 3.2.1.1 Form of Statement Statement can be in various forms including: Oral or written Balchita Ltd v Kam Yuck Investment Co Ltd [1983] 2 HKC 333: Plans in a brochure used to market a property, regardless of the recitals contained in the brochure Cheng Kwok Fai v Mok Yiu Wah Peter [1990] 2 HKLR 440 (HC): A sketch of the floor plan of premises Wang Kah Lam v Concord Ltd [1979] HKLR 184: Stating a 1975 car to be a 1976 model) By conduct (e.g. Spice Girl Ltd v Aprilia World Service [2002] EWCA Civ 15 (CA): By promotional files and other materials) By concealment of deliberate act (Gordon v Selico (1986) 18 HLR 219 (CA): D painted the dry rot to conceal it before selling it to P) Silence Silence does not normally amount to misrepresentation (Fletcher v Krell (1873) 42 LJ QB 55) Fletcher v Krell (1873) 42 LJ QB 55: Employer terminated employment contract with employee since she had described herself as a spinster when applying for the job but she was in fact a divorcee. Held that she was not obliged to reveal that information Exceptions: (1) It is a half-truth, i.e. the silenced part conveys misleading impression Dimmock v Hallett (1866-67) LR 2 Ch App 21 (CA): By the time of land auction, D did not mention that the tenant had already given notice to quit Curtis v Chemical Cleaning & Dyeing Co [1951] 1 KB 805: D did mention an exemption clause excluding liability for damage to beads and sequins, but failed to mention the exclusion of “any damage howsoever arising” III - 3 Nottingham Brick & Tile Co v Butler (1889) 16 QBD 778: Without reading the documents, the seller’s solicitor replied to the buyer that there was not restrictive covenant on the land that he was aware of (2) Change of circumstances With v O’Flanagan [1936] Ch 575 (CA): The seller failed to inform the buyer of the reduced value for a medical practice when he, a doctor, became seriously ill during the course of negotiation (3) Contracts uberrimae fidei (one that imposes a duty on one party to disclose all material facts to the other party) Contract of insurance (St. Paul Fire and Marine Insurance Co (UK) Ltd v McConnell Dowell Constructors Ltd [1995] 2 Lloyd’s Rep 116 (CA)) Family settlement (4) There is fiduciary relationship between parties By agent So long as the agent acted within his principal’s express or ostensible authority, the principal shall be liable for any misrepresentation made by the agent (Pepsi-Cola International Ltd v Charles Lee [1973-1976] HKC 82) Estate agents in HK are not necessarily the vendor’s agents for they act as brokers rather than under agency (Cheng Kwok Fai v Mok Yiu Wah Peter [1990] 2 HKLR 440 (HC)) 3.2.1.2 Of Fact Statement must be a statement of fact, not opinion or intention Can be a mistake of law (Kleinwort Benson v Lincoln CC [1999] 2 AC 349 (HL)) Statement of opinion A statement of a belief based on view incapable of actual proof III - 4 An honest opinion which the representor was not in a better position to know the truth than the representee Bisset v Wilkinson [1927] AC 177 (PC): D sold his land and said that it would carry 2,000 sheep. Normally, any statement made by an owner who has been occupying his own farm as to its carrying capacity would be regarded as a statement of fact, but here P was not justified in regarding anything said by D as to the carrying capacity, since both parties were aware that D had not carried on sheep-farming on the land Advertising puffs (sales pitch), except it is backed by scientific facts Dimmock v Hallett (1866-67) LR 2 Ch App 21 (CA): The description of a land by the auctioneer as “fertile and improvable” was held a mere flourishing description Chan Yeuk Yu v Church Body of the Hong Kong Sheng Kung Hui (Unreported, HCCT 83 / 1999) (CFI): A page in a glossy and colourful sales brochure stated a phrase of "regal surroundings for the select few" was held no more than "mere puff" or "sales pitch" An opinion which the presenter did not actually held (Smith v Land & House Property (1884) LR 28 ChD 7: The landlord described the tenant of the flat for selling is “desirable”, in fact the rent was hard to be collected.) Statement of intention or prediction Statement to promise to do something in the future is a statement of intention, which has no liability, unless the statement maker has no such intention at the time of making the statement (Edgington v Fitzmaurice (1885) 29 ChD 459 (CA): The statement was made with regard to the intention of using the money for finance future expansion; the real intention was meet existing liability. Held that it was a statement of fact.) III - 5 3.2.2 False False means inaccurate, even if it was made honestly and based on reasonable grounds. Whether the statement was made fraudulently, negligently or innocently is important for the determination of remedies. 3.2.3 Addressed to the Representee The statement must have been addressed to the person being misled or to his agent (Peek v Gurney (1873) LR 6 HL 377 (HL)) The requirement would be satisfied if the statement is intended or known to be passed on the class of persons whom the representee falls within (Andrews v Mockford [1896] 1 QB 372 (CA)) 3.2.4 Inducement The statement must have materially induced the contract to be entered into (Edgington v Fitzmaurice (1885) 28 ChD 459 (CA)) No inducement if the misrepresentation occurs after the contract is concluded (Tin Shui Wai Development Ltd v Polykin Ltd (Unreported, HCA 561/2004)) A claimant who relies partly on a misrepresentative statement will still have remedies (Edgington v Fitzmaurice (1885) 28 ChD 459 (CA)) False statement inducing representee to preserve pervious decision is a reliance (County Natwest Bank v Barton (1999) The Times 29 July (CA)) The representee need not prove that a reasonable man would rely on the misrepresentation - when the misrepresentation was material, it raises a presumption of it being relied upon. (Museprime Properties v Adhill Properties (1991) 61 P & CR 111 (CA): The statement was that the rent review of the properties was outstanding and still open for negotiation. In fact the new rents had already been agreed.) III - 6 Exceptions The representee was unaware of the misrepresentation Re Northumberland & Durham District Banking Co., ex parte Bigge (1858) 28 Ch 50: A false report of the company’s financial status was published but the claimant had not read the report when the contract was entered Horsfall v Thomas (1862) 1 H&C 90: P purchased a gun with a concealed defect. Upon the enquiry made by P, D later wrote to the defendant stating that the gun was free from imperfection. The gun was faulty, but the misrepresentation did not induce him to enter the contract as he was unaware of it when the contracted entered.
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