Indigo International Holdings Ltd & Anor v Brave Challenger, Owners and/or demise charterers of

A representation is actionable where it materially influences entry into a contract. The representee need not prove that it would have contracted only because of the representation. Reliance may be established even where the contract contains an “as is where is” term, particularly where the buyer relied on the seller’s superior knowledge. A “complete refit” ordinarily denotes a thorough overhaul restoring the vessel to a condition fit for prolonged service. Where machinery has been represented as properly overhauled and ready for commercial operation, missing maintenance records may make that representation materially false. Damages under the Misrepresentation Act 1967 are available where the representor fails to prove reasonable grounds for believing the representation true. An express “as is where is” term may negative implied terms under section 14 of the Sale of Goods Act.

Two connected actions arose from the sale of the vessel Brave Challenger by Indigo International Holdings Ltd and Urbane Ltd to Ronastone Ltd, a company owned by the Succession Trust. In one action, the sellers sought to enforce a mortgage securing the unpaid balance of the purchase price. In the other, Ronastone and the trustees sought relief for alleged misrepresentations concerning the vessel’s refit, gas-turbine engines, MCA certification and charter readiness.

The court had to determine whether the mortgage had been varied, whether the representations were made and relied upon, whether they were true, and what relief followed.

1. Mortgage. The alleged agreement reducing the balance, extending payment indefinitely and rescinding the mortgage was not made out. The only variation proved was the written extension to April 2002. The sellers were therefore entitled in principle to enforce the mortgage, subject to the misrepresentation claim.
2. Representations. The sellers represented that the vessel had undergone a complete refit at Vospers, that its gas turbines had been overhauled by Hoverspeed, that the vessel was in pristine condition, had successfully completed sea trials and was ready for chartering. A complete refit ordinarily means a thorough overhaul involving renewals and repairs sufficient to restore the vessel to a condition fit for prolonged service.
3. The engine representations were materially false. Two engines had not been overhauled by Hoverspeed; the work by HW Turbines was uncertain and questionable; another engine had received only limited work; and the absence of maintenance logs prevented safe certification and operation. The August outings did not establish successful sea trials.
4. Reliance. The buyers proved that the engine representations materially influenced the purchase. It was unnecessary to show that the contract would not have been made without them. The “as is where is” clause did not negate reliance and, in the circumstances, reinforced the buyers’ dependence on the sellers’ information.
5. Under the Misrepresentation Act 1967, the sellers failed to prove that they had reasonable grounds to believe the engine representations were true. The buyers were therefore entitled to damages. The alternative claim under section 14 of the Sale of Goods Act was unnecessary and, in any event, the express contractual term negatived the implied terms.
6. The vessel’s value at the date of sale was assessed at approximately £750,000. Primary damages were to be calculated by reference to the difference between the contract price and that value. The form of order and consequential loss required further argument.