Spice Girls Limited v Aprilia World Service BV

A representation about future conduct or opinion may imply a present representation about the representor’s knowledge. A representation made during negotiations may continue until the transaction ends. The representor must correct it if intervening events make it false or misleading.

Meaning, reliance and inducement are assessed objectively and in the context of the negotiations as a whole. A material representation need not be the sole inducement. Reliance may be inferred where the representation was intended and naturally likely to induce the contract.

Under section 2(1) of the Misrepresentation Act 1967, liability arises where misrepresentation induces a contract and causes loss, unless the representor proves an honest belief, supported by reasonable grounds, in the represented facts.

A company exploiting the services and intellectual property of a five-member musical group entered into a sponsorship and product-endorsement agreement with a scooter distributor. Before execution, one member had declared her intention to leave during the period for which important promotional rights would remain exercisable. The company did not disclose that intention and continued to approve five-member promotional material, authorised assurances of commitment and participated in a commercial shoot.

Arden J held the company liable under section 2(1) of the Misrepresentation Act 1967, but only for representations by conduct connected with the commercial shoot and promotional material. She awarded the distributor £39,699 and dismissed the company’s claim to unpaid contractual sums to avoid circuity. She also ordered the successful distributor to pay 10% of its own and the company’s costs.

The company appealed on liability and damages. The distributor sought to uphold liability on a wider basis and cross-appealed on costs.

1. Appeal dismissed and cross-appeal allowed. The Court, in a single judgment delivered by the Vice-Chancellor, held that the company was liable under section 2(1) of the Misrepresentation Act 1967 on the wider basis advanced by the distributor.

2. A statement about the future or an opinion may contain an implied representation about an existing fact or the representor’s knowledge. A representation made to procure an intended transaction may continue until completion or abandonment. If it becomes false while continuing, the representor must correct it. Its meaning and effect are assessed objectively in the circumstances, including the whole course of negotiations.

3. The approval and continued use of promotional material depicting all five performers implied that the company knew of no declared intention by a member to leave during the period of the promotional rights. The assurance in the agent’s fax that every member was committed to the entire sponsorship carried the same implication. It was false because the company knew of the declared intention and resulting risk. The later definite announcement made disclosure essential.

4. The subsequent draft agreement, its description of the group as “currently comprising” five named members, and the commercial shoot affirmed rather than corrected the earlier representations. Although literally directed to the present, the description was misleading in the context of an agreement conferring future rights. The separate episodes had to be considered cumulatively as a series of continuing representations.

5. The representations were material inducements. Meaning was governed by what a normal representee would reasonably understand. Because the representations were naturally likely and intended to induce execution, reliance and any necessary intention could be inferred. A misrepresentation need only be a material inducement, not the sole inducement.

6. The damages appeal failed. The evidence did not establish that the musical association enhanced relevant sales of standard scooters outside Italy. In any event, profits arising from a pre-existing, collateral group distributorship could not fairly be isolated from the associated manufacturing and promotional costs and credited against the loss.

7. The costs order was set aside. Although a successful party may be ordered to bear the costs of discrete unsuccessful issues under the Civil Procedure Rules, the findings that the distributor had acted unreasonably in pursuing the contract and oral-representation issues could not be supported. There was no sufficient reason to depart further from the general rule favouring the successful party.

1. Court of Appeal (Civil Division): The company’s appeal against liability and damages was dismissed. The distributor’s cross-appeal against the order requiring it to pay 10% of its own and the company’s costs was allowed: [2002] EWCA Civ 15.
2. Chancery Division: Arden J held the company liable under section 2(1) of the Misrepresentation Act 1967, awarded the distributor £39,699, dismissed the company’s monetary claim to avoid circuity, and ordered the distributor to pay 10% of its own and the company’s costs. No citation was stated.