Vahey v Kenyon

Where a purchaser establishes that a material misrepresentation induced entry into a contract, a vendor cannot defeat the claim merely by suggesting that the purchaser might have proceeded if the truth had been disclosed. A speculative observation is not a finding that the purchaser would have contracted on the same terms. The representor bears the burden of showing that the misrepresentation did not induce the transaction, and that burden is not discharged where reliance is expressly found and the contrary evidence is unchallenged. A further question concerning whether loss was caused where the purchaser would have bought the property anyway did not arise because the factual premise for it was absent.

Mr Vahey purchased a property from Mr Kenyon after written replies to pre-contract enquiries gave a misleading account of the property’s flooding history. The property was subsequently affected by flooding, and Mr Vahey brought proceedings alleging misrepresentation and deceit.

Following a trial on liability, HHJ Bailey found that Mr Kenyon was liable in deceit and that Mr Vahey was entitled to damages to be assessed. Permission to appeal was granted on the argument that the judge had found, or should have found, that Mr Vahey would have bought the property even if told the truth, and on the consequential issue whether the misrepresentation caused loss. The central issue was whether the judge had made that counterfactual finding.

1. Appeal dismissed. The judge had not found that Mr Vahey would probably have purchased the property in any event, still less that he would have purchased it at the same price.
2. The judge’s observation that Mr Vahey might have proceeded if given a full and accurate account was speculative. It could not be read as a positive finding that he would have proceeded. Such a finding would also have been inconsistent with Mr Vahey’s unchallenged evidence that disclosure of the true flooding history would have destroyed his interest in continuing with the purchase.
3. The judge was entitled not to make the finding proposed by the appellant. The evidence did not require it, and the judge would not have been expected to make such a finding without addressing the purchaser’s evidence.
4. The representation was material, and the judge expressly found that Mr Vahey relied on it. The vendor therefore had to show that the purchaser was not induced by the misrepresentation, but had not done so. The possibility that the purchaser might have proceeded did not displace the finding of reliance.
5. The proposed question concerning causation of loss where a representee would have entered the transaction even if told the truth did not arise. The appellant accepted that both grounds were cumulative, and the court had not heard argument on the second question.

Lord Justice Lewison agreed with Lord Justice Beatson’s reasons. Lord Justice Mummery agreed with both judgments.

• Court of Appeal (Civil Division): dismissed the appeal from the order dated 16 December 2011 made by HHJ Bailey in the Central London County Court after a trial on liability.