Agbobu v ELF Oil (UK) Ltd

A negligent misrepresentation may induce a contract even where the purchase follows the representation several months later; no fixed period of proximity applies. The relevant question is whether the representation was false when made or when the claimant acted on it. A representation of exclusive distributorship conveys an ability to protect the market by preventing others from distributing the products. A principal may be liable where agents with ostensible authority make such assurances without actual authority and the principal accepts the resulting benefit. Where the trial judge fails to address that material question, the appellate court may determine it from the existing record where a retrial would be disproportionate.

The claimant appealed from an order of the Central London County Court, made by Mr Recorder Woods on 1 October 1999, dismissing claims for breach of contract and misrepresentation. Permission to appeal was limited to the misrepresentation claim.

The claimant alleged that representatives of the respondent had promised him exclusive distributorship rights for specified lubricant products in Nigeria and the ECOWAS countries. He entered distributorship agreements and later bought a consignment costing £12,488. The trial judge found that representations had been made on the respondent’s behalf, that they had induced the purchase, and that they had been made without proper care. He nevertheless held that the claimant had not proved that the representations were factually incorrect when made or when the expenditure was incurred. The central issue on appeal was whether that approach addressed the true substance of the representations.

Lady Justice Hale gave the leading judgment. Sir Martin Nourse and Lord Justice Henry agreed. The appeal was allowed and judgment was entered for the claimant.

1. Nature of the representation. The trial judge had concentrated on whether Elf Oil (Nigeria) Ltd possessed exclusive rights to distribute the products. That was not the only relevant question. The substance of the representations was that the respondent’s representatives were in a position to offer the claimant a protected market or exclusive rights. This implied an ability to prevent anyone else from distributing the products, not merely the absence of proof that another company held an exclusive contractual right.
2. Factual inaccuracy. The evidence made it implausible that the respondent’s United Kingdom company could bind itself to an inexperienced trader not to sell the products to anyone else in Nigeria or the ECOWAS countries, even for the initial year. The representatives knew that an Elf company was marketing products in Nigeria and knew of the risk of a clash. Evidence from the respondent’s legal department supported the conclusion that the representatives were not in a position to give the assurances, although they had ostensible authority to make them.
3. Inducement and timing. There was no rule requiring a contract induced by misrepresentation to be made within a particular time of the representation. The claimant’s purchase seven months later could still have been induced by the assurances. The claimant would not have bought the consignment without them.
4. Appellate resolution and remedy. The trial judge’s failure to address whether the respondent could offer the promised protection was sufficient to justify allowing the appeal. A retrial was unnecessary because the evidence and transcripts enabled the Court of Appeal to resolve the issue, and a further five-day trial would have been disproportionate. The respondent was liable for negligent misrepresentation. Judgment was entered for £12,488, with interest and costs as ordered.

1. Court of Appeal (Civil Division) — In [2001] EWCA Civ 537, the appeal was allowed and judgment was entered for the claimant for £12,488, with interest and costs.
2. Central London County Court — Mr Recorder Woods dismissed the claims for breach of contract and misrepresentation by order dated 1 October 1999.