Royscot Trust Ltd v Rogerson

JurisdictionEngland & Wales
Judgment Date21 March 1991
Judgment citation (vLex)[1991] EWCA Civ J0321-1
Docket Number91/0205
CourtCourt of Appeal (Civil Division)
Date21 March 1991
Royscot Trust Limited
(1) Andrew Jeffrey Rogerson
(2) Maidenhead Honda Centre Limited

[1991] EWCA Civ J0321-1


Lord Justice Balcombe

Lord Justice Ralph Gibson






Royal Courts of Justice

MR M.K.I. KENNEDY, instructed by Messrs Barrett & Thomson (Slough), appeared for the Appellant (Second Defendant).

MR N.J. SPENCER-LEWIS, instructed by Messrs Edge & Ellison (Birmingham), appeared for the Respondent (Plaintiff).


This appeal, from a judgment of His Honour Judge Barr given in the Uxbridge County Court on 22nd February 1990, raises an issue on the measure of damages for innocent misrepresentation under the Misrepresentation Act 1967.


The second defendant to the action and the appellant in this court, Maidenhead Honda Centre Ltd ("the Dealer"), is a motor-car dealer. At the beginning of May 1987 the first defendant Mr Andrew Jeffrey Rogerson ("the Customer") agreed with the Dealer to buy on hire-purchase a second-hand Honda Prelude motor-car for the price of £7,600, of which a deposit of £1200 was to be paid, leaving a balance of £6,400. The plaintiff and the respondent to this appeal, Royscot Trust Ltd ("the Finance Company") is a company which finances hire-purchase sales. It does so in the usual way, that is by purchasing the car which is the subject of the sale from the dealer and then entering into a hire-purchase agreement with the customer.


The Finance Company has a policy that it will not accept a hire-purchase transaction unless the deposit paid represents at least 20% of the total cash price. On 5th May 1987 the Dealer submitted a proposal to the Finance Company in relation to the Customer's proposed purchase of the car, by which the Dealer represented to the Finance Company that the total cash price payable was £8,000 and that a deposit of £1600 had been paid by the Customer. It will be observed that the balance under these figures, £6,400, is the same as that which was truly payable by the Customer. It is common ground that this was a misrepresentation and that in reliance upon it the Finance Company entered into a hire-purchase agreement with the Customer dated 5th May 1987 under which he agreed to pay a total price (including the deposit) of £9,878.92, of which the balance of £8,278.92 was to be paid by 36 monthly instalments of £229.97. At no time has it been pleaded or claimed by the Finance Company that in making this representation the Dealer was acting fraudulently. Accordingly in making its claim for damages the Finance Company relies on innocent misrepresentation under section 2(1) of the Misrepresentation Act 1967. In fact the Customer paid the Dealer a deposit of £1200, and the Finance Company paid the Dealer the sum of £6,400.


The Customer paid to the Finance Company under the hire-purchase agreement monthly instalments amounting in all to £2,774.76. In August 1987 the Customer dishonestly sold the car to a private purchaser for the sum of £7,200: that purchaser acquired a good title to the car under the provisions of the Hire Purchase Act 1964. The Customer told the Finance Company in August 1988 that he had wrongfully disposed of the car a year previously and on 28th September 1988 made his last monthly payment to the Finance Company. The car was then said to be worth at least £6,325.


On 22nd September 1989 the Finance Company issued proceedings against both the Customer and the Dealer in the Uxbridge County Court, and on 23rd November 1989 entered judgment in default against both defendants for damages to be assessed. It was that assessment of damages which came before Judge Barr on 22nd February 1990.


As against the Customer the judge assessed the Finance Company's damages as £5,504.16 (the balance of £8,278.92 less the instalments paid of £2,774.76) and judgment in that sum was entered against him. There has been no appeal against that judgment.


Before the judge counsel for the Finance Company submitted that its loss was the difference between the sum of £6,400 which it paid to the Dealer and the sum of £2,774.76 paid by the Customer, viz. £3,625.24. Counsel for the Dealer submitted that the Finance Company had suffered no loss since they had acquired title to a motor-car worth at least £6,400. The judge accepted neither submission. He held that if the figures on the hire-purchase agreement had shown a deposit of £1200 and a cash price of £6,000, then the Finance Company would have paid £4,80C to the Dealer and would have had no recourse against it since the deposit would have been correctly shown as £1200. Because the Finance Company were induced to pay an extra £1600 that was the relevant loss suffered by the Finance Company. He assessed damages in that sum with interest thereon from 1st June 1987 at the rate of 12.5% (calculated to be £546.30) and it was for those sums that judgment for the Finance Company was entered against the Dealer.


Against this judgment the Dealer has appealed, claiming the the damages should have been assessed at nil, and the Finance Company has served a respondent's notice under Order 59, rule 6(1) (a), claiming that its judgment against the Dealer should be increased to the sum of £3,625.24 with interest.


Before us neither side sought to uphold the judge's assessment of damages. It assumed a hypothetical sale of the car with a deposit of £1200 and a balance of £4,800 payable by the Finance Company to the Dealer, and there was no evidence the such a sale would ever have taken place. As was said by the Privy Council in its judgment in United Motor Finance Co. v. Addison & Co. Ltd [1937] 1 All E.R. 425, 429 (a case similar on its facts to the present case, save that the misrepresentations were there fraudulent) :

"Nor can they [the dealers] modify the resulting damages on the footing that though in the absence of misrepresentation the plaintiff firm [the finance company] would not have made the contract with the defendants [the dealers] or with the hirer which it did in fact make, nevertheless even if it had known the facts it would have entered into some other contract and thus lost money in any event."


In fairness to the judge it should be said that this case was not cited to him.


So I turn to the issue on this appeal which the Dealer submits raises a pure point of law: where (a) a motor dealer innocently misrepresents to a finance company the amount of the sale price of, and the deposit paid by the intended purchaser of, the car; and (b) the finance company is thereby induced to enter. into a hire-purchase agreement with the purchaser which it would not have done if it had known the true facts; and (c) the purchaser thereafter dishonestly disposes of the car and defaults on the hire-purchase agreement; can the finance company recover all or part of its losses on the hire-purchase agreement from the motor dealer?


The Finance Company's cause of action against the Dealer is based on section 2(1) of the Misrepresentation Act 1967. This subsection reads (so far as relevant) as follows:

"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…"


As a result of some dicta by Lord Denning M.R. in two cases in the Court of Appeal— Gosling v. Anderson [1972] E.G.D. 709 and Jarvis v. Swans Tours [1973] Q.B. 233, 237—and the decision at first instance in Watts v. Spence [1976] Ch. 165, there was some doubt whether the measure of damages for an innocent misrepresentation giving rise to a cause of action under the 1967 Act was the tortious measure, so as to put the representee in the position in which he would have been if he had never entered into the contract, or the contractual measure, so as to put the representee in the position in which he would have been if the misrepresentation had been true, and thus in some cases give rise to a claim for damages for loss of bargain. Lord Denning's remarks in Gosling v. Anderson were concerned with an amendment to a pleading, while his remarks in Jarvis v. Swans Tours were clearly obiter. Watts v. Spence was disapproved by this court in Sharneyford Supplies Ltd v. Edge [1987] Ch. 305, 323. However, there is now a number of decisions which make it clear that the tortious measure of damages is the true one. Most of these decisions are at first instance and will be found in Chitty on Contract (26th ed.) para. 439, note 63 and in McGregor on Damages (15th ed.) para. 174 5. One at least, Chesneau v. Interhome Ltd (1983) 134 N.L.J. 341 is a decision of this court. The claim was one under section 2(1) of the 1967 Act and the appeal concerned the assessment of damages. In the course of his judgment Eveleigh L.J. said (C. A. Transcript 83, No. 238 p. 5) :

"[Damages] should be assessed in a case like the present one on the same principles as damages are assessed in tort. The sub-section itself says: '…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…' By 'so liable' I take it to mean liable as he would be if the misrepresentation had been made fraudulently."


In view of the wording of the subsection it is difficult to see how the measure of damages under it could be other than the tortious measure and, despite the initial aberrations...

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1 firm's commentaries
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