Royscot Trust Ltd v Rogerson

Section 2(1) of the Misrepresentation Act 1967 makes a non-fraudulent representor liable in damages on the same basis as a fraudulent representor. The representee may therefore recover all loss directly flowing from entry into the induced transaction, whether or not that loss was foreseeable, subject to remoteness.

A foreseeable dishonest disposal of hire-purchase goods by the hirer does not break causation as a novus actus interveniens. Damages must reflect the real induced transaction and cannot be reduced by hypothesising a different transaction which might have occurred had the truth been known.

A motor dealer falsely stated to a hire-purchase finance company that a customer had paid a larger deposit and that the vehicle had a higher cash price. The finance company entered into the transaction in reliance on the statement. The customer later dishonestly sold the vehicle and defaulted.

His Honour Judge Barr in the Uxbridge County Court awarded the finance company £1,600 against the dealer. The dealer appealed, contending that the loss was nil. The finance company cross-appealed, seeking the balance of its actual loss. The central issues were the measure of damages under section 2(1) of the Misrepresentation Act 1967, causation, and the effect of the customer’s wrongful sale.

1. Appeal dismissed; cross-appeal allowed. Balcombe LJ, with whom Ralph Gibson LJ agreed as to the result and the construction of the statute, held that the finance company was entitled to £3,625.24 with interest from the dealer.

2. Under section 2(1) of the Misrepresentation Act 1967, a person who makes a non-fraudulent misrepresentation is liable in damages as if the representation had been fraudulent. The applicable measure is therefore the tortious measure for deceit, rather than a contractual measure based on the truth of the representation. The representee may recover all losses directly resulting from entering the induced agreements, even if unforeseeable, subject to remoteness.

3. The customer’s dishonest sale of the car did not break the chain of causation. Although the customer acted freely and unlawfully, wrongful disposal of a car held under hire purchase was reasonably foreseeable. That foreseeability strongly indicated that the disposal was not a novus actus interveniens. Ralph Gibson LJ additionally held that, even on a negligence-based foreseeability approach, loss through a hirer’s default, including dishonest sale, was foreseeable because the dealer knew why the finance company required a minimum deposit.

4. The loss was not confined to the value received on the date of reliance. In substance, the finance company entered the transaction to receive the hirer’s instalments and retain the security of ownership in the vehicle. Nor could damages be reduced by assuming that, with accurate information, the finance company would have entered a different and loss-making transaction. The recoverable loss was therefore the £6,400 paid to the dealer less £2,774.76 received from the customer.

5. The County Court judgment was set aside. Judgment was entered for the finance company against the dealer for £3,625.24, with interest of £1,140.59. The finance company was required to give credit for sums recovered from its judgment against the customer.

• Court of Appeal: In [1991] 2 QB 297, dismissed the dealer’s appeal, allowed the finance company’s cross-appeal, set aside the lower award and entered judgment for £3,625.24 with interest.

• Uxbridge County Court: His Honour Judge Barr awarded the finance company £1,600 with interest against the dealer following assessment of damages on 22 February 1990.