Please enable JavaScript.

Coggle requires JavaScript to display documents.

Misrepresentation - Coggle Diagram

- - - - Avon Insurance PLC v Swire Fraser Ltd (2000):
        
        The test to apply whether or not the statement is "substantially correct", involves consideration of inducement of individual to the contract
      - Mclnerny v Lloyds Bank Ltd (1974):
        
        An unreasonable interpretation of statement by C means claim failed
      - Statement:
        
        "Statement" is broadly interpreted. Statement is not only verbal but can also be by conduct that amounts to purpose for misrepresentation
        
        Gordon v Selico (1986):
        
        Where the concealment of dry rot during an inspection of property was held to be a statement, that misinterpreted the fact that the property was free of dry rot
        
        Half-truths:
        
        A misleading half-truth = misrepresentation.
        
        A true statement that is misleading due to all relevant information not being disclosed
        
        Nottingham Patent Brick & Tile Co v Butler (1885):
        
        Solicitor answered that he was not aware of the burdened land, which is technically true as it was not checked yet. But when he checked, there were restrictive covenants.
        
        Hence statement was technically true, but only half-true and misleading = construed as false
        
        Change of circumstances:
        
        If a statement made is true at the time of making, but subsequently became untrue, there's a positive duty on the statement maker to inform all relevant party of this
        
        With v O' Flanagan (1936):
        
        Facts: D was contracting sale of his medical practice. Questions was asked about the incomes of his practice. At the time business was good (it was true) but business income fell a new months later
        
        Held: Due to change of circumstance, D has a positive duty to notify C on this. The fact that he didn't = false statement of fact
        
        Contracts of utmost good faith:
        
        Certain contracts impose higher level of disclosure in normal circumstances.
        This is done due to nature of relationships between parties.
        
        e.g. An insured duty is to disclose all material facts at time of formation of contract for insurance. Failure to do so results in any form of claim under insurance failing
        
        There is no positive duty to disclose any facts, defers greatly from usual duties of contracting parties - Keates v The Earle of Cadogan (1851):
        
        Facts: The property C was interested was found to be structurally unstable and likely to collapse at any stage
        
        Landlord's duty: despite knowing the property's condition, D didn't inform C during the negotiations or after C begun occupying
        
        Legal issue: Whether a landlord has obligation to inform tenant of poor state of property before entering into a lease
      - False Statement of Fact
        
        Statement of Opinion:
        
        General rule is that the statement of opinion is not a fact
        
        Bisset v Wilkinson (1927):
        
        Facts: Farmer stated that 'it was his opinion" that the land can hold 2,000 sheep. C claimed for misrepresentation.
        
        Held: Not a statement of fact on 2 factors: 1) he expressly stated only his opinion. He said he had no expertise whether the land held that many sheep. 2) he never claimed to keep sheep on the land, it's merely a guess. C was also aware of this fact
        
        Exceptions where a person can be sued for Opinions
        
        a) Person expressing the opinion is aware of facts that indicate that the opinion cannot be sustained
        
        Smith v Land House Corporation (1884):
        
        The Landlord knew the Tenant was behind with the rent. He cannot be described as a most desirable tenant"
        
        b) If representor has particular expertise, skill/knowledge relating to the thing he said, the inference that the representor is aware of facts that support his opinion is more easily raised
        
        c) Evidence that the person making the statement does not believe it at the time its made.
        
        Proof that maker of statement is aware of contradictory facts may prove they did not believe the statement to be true
        
        Statement of Intention:
        
        A misrep as to future intention is usually not actionable for misrepresentation as it wont amount to a statement of fact.
        
        Inntrepreneur Pub Co v Sweeney (1885):
        
        General rule: statement of intent won't be held to a fact even if D intentionally changes their mind as to their intentions
        
        A statement of future intention made with absolutely no intention at the time of the statement will amount to representation
        
        Edgington v Fitzmaurice (1885):
        
        Held that the "state of a man's mind is as much a fact as the state of his digestion". Speaker represents the fact that he/she believes that what is being said is true, where in fact no such belief was held
        
        Facts: The directors of a business issued a prospectus containing debentures to invite subscriptions. Prospectus stated that debentures are for completing alterations to company's buildings, developing trade, and purchasing vans and horses. But the true purpose is to pay off other liabilities
        
        Misrepresentation: C relied on the prospectus and believed the debentures will provide a charge on the company's property. Later, the company became insolvent
        
        Decision: Court held that the misstatement about the debenture's purpose was material and influenced by C. Directors were liable for deceit even though C also made an erroneous assumption
        
        Statement of Law:
        
        A statement that is incorrect will amount to a false statement of fact for purpose of misrepresentation.
        
        Now HoL recognised the possibility of restitutionary remedies for mistake of law - Kleinwort Benson Ltd v Lincoln City Council (1999)
        
        Pankhania v Hackney London Borough (2002):
        
        Facts: Concerns purchase of a property to be used as a carpark. There's a statement that the occupier of the car park could be evicted within 3 months under law. This was incorrect, thus classified as a false statement of fact
  - - - Direct Communication of the representation to the Representee
      - Representation addressed to a 3rd party with the intention that it be passed to the Representee - Commercial Banking Co. of Sydney v RH Brown & Co
  - - - Raffeisen Zentralbank Osterreich AG v Royal Bank of Scotland plc (2010):
        
        C must prove that "but for such a representation" he would not have entered into the contract on such terms on which he did
        
        Causation test - if not for you, i wouldn't be in this position
      - Dadourian Group International Inc v Simms (2009):
        
        If the misrepresentation is not material one the burden of proving inducement will shift to the representee who must positively prove that it was reliance upon the representation that caused him to enter a subsequent contract
      - Museprime v Adhill (1990):
        
        If the misrep have induced a reasonable person to enter into a contract, then the courts will presume that it did so induced the Representee to contract ((if it can work on a reasonable person, D must show C did not rely)
        
        It will then be up to the Representor to show that the Representee did not rely on the representation
        
        If the misrep would NOT have induced a reasonable person to enter into a contract, the courts will presume that it did NOT so induce the Representee to contract (if it cannot work in a reasonable person, C must show it did)
        
        It will then be up to the Representee to show that the representation did in fact induce him to enter into the contract
      - No Inducement / Reliance if: argument of the seller (the seller will use this to defend himself):
        
        The representee was AWARE OF THE TRUTH of the statement
        
        It must be very clearly proven that the representee was aware of the truth
        
        If the Representee had the opportunity to verify - Redgrave v Hurd:
        
        Facts: C (a solicitor) advertised for a law partnership. He sought successor who will become a partner by purchasing C's property. D responded an was informed of the business's worth. C showed documentation indicating nearly $200 per year and offered D a chance to assess the accounts. D agreed to buy the property but later found it to be worthless
        
        Issue: Courts considered whether C's misrepresentation was significant and whether D should have inspected the accounts
        
        Held: Courts allowed the contract to be rescinded due to the innocent misrepresentation. Courts didn't find fraudulent misrep, D's reliance on C's misrepresentation was sufficient
        
        BUT - Smith v Eric S Bush (1990):
        
        Obiter suggests that in certain situations it may be unreasonable not to check. In situations with commercial/high value transactions, would be reasonable to expect the Representee to check
        
        The Representee relied upon some other inducement / He made his own inquiries - Attwood v Small (1838)
        
        Facts: C purchased an estate from D, where the amenities generated income.
        
        Preliminary Agreement: Before the purchase, parties made a preliminary agreement. C agreed to buy the estate, subject to being satisfied that their reports and accounts provided by D were accurate
        
        Misrepresentation: C had their accountants and directors verify the accounts and reports and they were satisfied with their accuracy. But later turned out that the accounts had significant exaggerated the income generated from the state
        
        Legal issue: Whether C's reliance on their own expert's assessment meant they had not relied on D's accounts
        
        Held: C was unsuccessful in rescinding (remedy) the contract under misrep. Courts help that by relying on their own judgement after verifying the reports, they didn't solely relied on D's accounts
        
        (if you conduct your own research and you still enter into the contract = not reliance)
        
        The Representee was not aware of the misrepresentation - Horsfall v Thomas (1862):
        
        Facts: C sold a gun that exploded when fired as a metal plug was used to conceal a defect. The use of the plug could've amounted to representation by conduct that the barrel was sound and free of defects
        
        Held: Since D did not inspect the gun, he was not aware of the misrepresentation and thus cannot be said to have induced him to buy it
        
        (you don't know about the misrep, = no misrep, = no inducement = no reliance)
- - - - A) Fraud proven when the false representation is made:
        
        1) Knowingly or
        
        2) Without belief in its truth or
        3) Recklessly / carelessly whether its true or not
        
        Thomas Witter Ltd v TBP Industries Ltd (1996):
        
        clarified that where a statement is made where the statement maker has no idea whether or not its true or false, statement = fraudulent due to recklessness asserting its true when it may not be
      - B) True statements which become false:
        
        Some statements can be true at the time of the statement, but later becomes false
        
        In those situations, its established that there's duty for the statement maker to make the representee aware of this change
        
        White v O' Flanagan determines which is fraudulent / negligent when there's a change in circumstance:
        
        Fraudulent: The statement maker is aware there is a duty to notify the representee of a change in circumstance
        
        Negligent: The statement maker not aware there's a duty to notify representee of change in circumstance
      - C) If fraud is proven, motif of the guilty person is immaterial:
        
        Polhill v Walter - the representor knew that the statement is false but made it for the benefit of his principle and for the benefit to himself. He made it with a good motive. But its irrelevant
        
        D) Burden of proof is with C (representee) to prove fraud and the burden is a heavy one
        
        E) Fraud is a serious allegation and its difficult to prove. Cannot simply allege unless there's good grounds for it
  - - - Facts: C (Hedley) are advertising agents who provide substantial amounts of advertising to Easipower. If Easipower did not pay, they claimant will be responsible for such amounts. C became worried that Easipower will not be able to pay for it, and claimant sought assurances from the Easipower's bank that they are able to pay for it. The defendant (Easipower's bank) assured C that Easipower is able to pay for it but said that the report was "Confidential. For your private use and without responsibility on the part of the bank or its officials". C relied on the report but eventually resulted in a loss. Claimant brought action against defendant under tort of negligence.
        
        Held: HoL held that the defendant had effectively disclaimed any assumption of DOC through their disclaimer letter, thus not liable
    - - Knowledge of the Representor:
        
        The greater the knowledge the Representor has than the Representee and the purpose for which the representee is likely to rely on his statement
        
        Caparo Industries v Dickman:
        
        C bought shares in the company after receiving the audited accounts. He later made a takeover bid. After takeover C sued auditors alleging that audited accounts were misleading as they showed profit when in fact there was a loss.
        
        C said the auditors owed a DOC to investors and potential investors as they should've been more aware that a press release saying that profits will fall significantly and made C vulnerable to a takeover bid and that bidders might rely on the accounts
      - If the Representor has special skill
        
        Morgan Crucible v Hill Samuel Bank (1991):
        
        Facts: C made a bid for D that later issued circulars containing profit records and forecasts recommending its shareholders not to accept the bid. Eventually C increased the bid and D recommending acceptance, C's bid succeeded. Later C discovered that the accounts exaggerated D's profits and D was worthless. If C had known the true facts he never would've made the bid. C sued D's bank, directors and accounts for negligence
        Held: D should've known C will rely on circulars to decide whether to increase bid. Thus there might be proximity
      - Purpose for which the statement was made (Special Reliance & General Circulation):
        
        If the Representor makes the statement with intention that the representee relies on it, then liability is imposed.
        
        If its a general statement = not liable
      - It must be reasonable for the Representee to rely on the Representor's statement:
        
        Burden of proof here is on C to prove these elements, that the Representor was negligent