Howard Marine and Dredging Co Ltd v A Ogden & Sons (Excavations) Ltd

Under section 2(1) of the Misrepresentation Act 1967, a person who makes a misrepresentation inducing a contract and causing loss is liable as if the statement had been fraudulent, unless the representor proves both reasonable grounds for belief and actual belief up to the time of contracting. The burden lies on the representor. Liability does not depend on a common-law duty of care or negligence. Under section 3, a term restricting misrepresentation liability is effective only to the extent that reliance on it is fair and reasonable in the circumstances. Such clauses are construed narrowly, and a clause concerning acceptance of a vessel’s fitness did not cover an inaccurate pre-contract statement about deadweight capacity.

Howards claimed outstanding hire after delivering two barges to Ogdens for use in a major excavation project. Ogdens counterclaimed for losses, alleging defective machinery and misrepresentations about the barges’ carrying capacity. At trial before Bristow J on a preliminary issue, the counterclaim was dismissed and the hire claim succeeded.

Ogdens appealed. The Court of Appeal considered whether statements made during negotiations were collateral warranties, whether the inaccurate July 1974 statement created liability under common law or section 2(1) of the Misrepresentation Act 1967, and whether the charterparty’s acceptance clause permitted reliance under section 3.

1. Disposition. By a majority, Bridge and Shaw LJJ allowed the appeal. The Master of the Rolls dissented and would have dismissed it.
2. Contract and warranty. Delivery and acceptance of the barges created a concluded contract on the charterparty terms despite the absence of signatures. The April telephone statements and the July interview did not create collateral warranties. The negotiations, the interval before delivery, inspection opportunities and the subsequent charterparty did not establish an intention to assume a separate binding warranty.
3. Section 2(1). The July statement that each barge could carry about 1,600 tonnes was an inaccurate representation made to obtain the hire contract and was acted upon. Bridge LJ held, and Shaw LJ agreed, that section 2(1) imposes liability where the representor would have been liable had the statement been fraudulent, unless the representor proves reasonable grounds for belief and actual belief up to the contract. This statutory liability does not depend on a variable common-law duty of care.
4. Reasonable grounds. Mr O’Loughlin honestly relied on an erroneous Lloyd’s Register figure, but the evidence did not establish objectively reasonable grounds for disregarding the more accurate ship documents. Howards therefore failed to discharge the statutory burden.
5. Clause 1 and section 3. Bridge LJ construed the acceptance clause narrowly. It supplied conclusive evidence only of attributes apparent on ordinary examination, and deadweight capacity required calculation or inspection of documents. In any event, the trial judge was entitled to refuse reliance on the clause as not fair and reasonable under section 3. The Master of the Rolls took the contrary view, relying on the parties’ commercial equality, inspection opportunities and the clause’s wording.
6. Common law. Bridge LJ left the negligence issue undecided. Shaw LJ would have found a common-law duty of care because the information was material and peculiarly within Howards’ knowledge. The majority decision rested on section 2(1).
7. Order. The judgment below was varied. The appellants received one-third of their costs, and costs below were remitted to Bristow J.

• Court of Appeal: By majority, allowed Ogdens’ appeal, varied the judgment below and held Howards liable under section 2(1) of the Misrepresentation Act 1967 for loss resulting from the July 1974 misrepresentation.
• High Court of Justice, Queen’s Bench Division: Bristow J dismissed Ogdens’ counterclaim and awarded Howards the outstanding hire on the preliminary liability issue.