Crystal Palace FC (2000) Ltd v Dowie

A fraudulent misrepresentation may consist of a statement about present intention or existing contact. A statement that was initially true may become false before the contract is made and must then be corrected. An ambiguous statement is deceitful where the defendant intended it to be understood in its untrue sense. The misrepresentation need only be one of the causes inducing the contract. Rescission is an equitable remedy governed by practical justice. Where rescission would revive an employment contract which cannot be performed because the employee is bound to a third party, and the contract cannot be severed to revive only one term, financial relief may be appropriate instead.

The claimant football club released the defendant, its manager, from his employment contract under a compromise agreement dated 22 May 2006. The club alleged that the defendant had falsely represented that he had no contact with Charlton Athletic and no present intention to join it. It sought rescission of the compromise agreement, revival of a compensation clause and financial relief.

The court tried preliminary issues concerning fraudulent misrepresentation and whether the compromise agreement should be rescinded. The central questions were whether the representations were false, known to be false, intended to induce the agreement and causative of the claimant’s decision to enter it, and whether rescission was practically available.

1. Fraudulent misrepresentation. The claimant proved that the defendant represented on 20 and 22 May that he had had no contact from Charlton and, by implication, had no present intention of joining it. Those representations were false. The defendant had contacted Charlton concerning his possible candidature and intended to join if offered suitable terms. He knew the representations were false and intended the claimant to rely on them.
2. A statement of present intention is a representation of existing fact. A representation is continuing until acted upon, and a statement which becomes false before reliance must be corrected. The representation need only be one inducing cause. The court applied the principles concerning the ordinary meaning of representations and intended meaning in Spice Girls Ltd v Aprilia World Service BV [2002] EWCA Civ 15, Akerhielm v De Mare [1959] AC 789 and the approach to serious allegations in Re H (Minors) [1996] AC 563.
3. Rescission. Rescission would retrospectively revive the employment contract. It would be unjust to place the defendant under simultaneous employment obligations to Coventry City FC. The employment contract could not be severed so as to revive only its compensation clause. Following the practical-justice approach discussed in Halpern v Halpern [2007] EWCA Civ 291, the appropriate remedy was financial relief rather than rescission.
4. The club’s claim that the defendant deceived it succeeded. The compromise agreement was not rescinded. The court left the precise categorisation and calculation of financial relief for a later stage.