Huyton SA v Distribuidora Internacional De Productos Agricolas SA De Cv

A party may be liable for misrepresentation where contractual obligations and earlier representations create a duty to correct the other party’s material misapprehension, even if the party did not appreciate the legal duty to speak. Reliance concerns whether the representee would have entered into the particular contract on the same terms, including its payment and security provisions. Where rescission cannot restore the parties to their former positions and contractual remedies provide adequate compensation, the court may declare the contract subsisting under section 2(2) of the Misrepresentation Act 1967.

Huyton and Dipasa entered into a joint venture concerning sesame seed intended for importation and sale in Mexico. The goods were to be stored in Huyton’s name at an Acosa warehouse. They were instead stored at Dipasa’s premises under an enabling agreement between Dipasa and Acosa, without Huyton being informed.

The parties later replaced the joint venture with a sale agreement. Huyton alleged that Dipasa had misrepresented, or failed to correct the misapprehension concerning, the place of storage. Huyton sought rescission, damages and relief based on the earlier joint venture. It also raised unilateral mistake. Mr Justice Andrew Smith rejected Huyton’s case on representation and reliance. The appeal concerned those findings and the appropriate remedy if the sale agreement had been induced by a non-fraudulent misrepresentation.

Appeal dismissed. The Court of Appeal disagreed with the judge’s conclusions on representation and reliance, but held that the ultimate relief would be the same.

1. Duty to correct the misapprehension. Dipasa remained under an obligation arising from the joint venture to inform Huyton where the goods were stored. The June communications represented that the goods would be stored in Acosa’s warehouses. Huyton had not accepted that it would thereafter look only to Acosa, and Dipasa had no entitlement to assume that Huyton had been informed of the changed arrangements. Dipasa knew that, when the sale agreement was made, Huyton remained under the misapprehension that the goods were stored at Acosa’s warehouse. The combination of those matters, together with the objective materiality of the storage arrangements to Huyton, imposed a duty to speak. Lack of awareness of that duty did not prevent liability for misrepresentation.
2. Reliance and contractual terms. The relevant question was not whether Huyton would have entered into some sale agreement at the same price. It was whether Huyton would have entered into this sale agreement on the same terms. Knowledge that the goods were in Dipasa’s warehouse would probably have led to renegotiation of the description of the goods and the payment-before-release provision, or to a requirement for equivalent security. The principle that a misrepresentation may induce a particular contract by affecting its terms was applied: The Larissa [1983] 2 Lloyd’s Rep 325 at 332. The materiality of the representation was sufficiently obvious that Dipasa should rebut the inference of inducement.
3. Appellate review. The court distinguished primary findings of fact from inferences and tested the judge’s conclusions against the contemporary documents and inherent probabilities. The approach to appellate restraint in witness findings was applied, while recognising that the challenged conclusions were inferences rather than primary factual findings: Assicurazioni General SpA v Arab Insurance Group (BSC) [2003] Lloyd’s Rep IR 131, with reference to the wide margin of appreciation at 172.
4. Remedy. The goods had been sold and disposed of, so the parties could not realistically be restored to their pre-contract positions. Under section 2(2) of the Misrepresentation Act 1967, the appropriate course was to declare the sale agreement subsisting and leave the parties to their contractual remedies. Huyton could recover the price and interest, and no separate loss flowing from the misrepresentation was established. It was unnecessary to determine unilateral mistake. The appeal was dismissed with no order for costs in the Court of Appeal; Huyton was ordered to pay £300,000 towards Dipasa’s costs below, with payment stayed pending arbitration.

• Court of Appeal (Civil Division): Appeal dismissed. The court held that the sale agreement should remain subsisting and left the parties to their remedies under it.
• Queen’s Bench Division: Appeal from the judgment of Mr Justice Andrew Smith. The citation of the judgment below was not stated in the judgment.