Foster & Anor v Action Aviation Ltd & Ors

Appellate interference with a trial judge’s findings of fact, particularly a finding on fraud after the judge has heard the witnesses, requires a rare case or the clearest grounds. A defendant’s genuinely held understanding of a representation may prevent fraud, even if the understanding was unreasonable and the representation was negligent. In an agency sale, the legal owner is ordinarily the relevant principal; the court need not investigate a beneficial owner behind the contracting party. A new personal-assumption-of-responsibility case could not fairly be introduced for the first time on appeal.

Mr and Mrs Foster and their company bought an SJ30 aircraft from Action Aviation. They alleged that Mr Harding had represented that the aircraft had never been in an accident. The High Court found a negligent but non-fraudulent representation, entered judgment against the Gibraltar seller, and rejected claims that Mr Harding was personally liable or was the undisclosed principal.

The claimants appealed against the findings on fraud and personal liability. The respondent’s notice contended that no representation had been made. The central questions were whether the Court of Appeal should interfere with the factual findings, whether the representation was fraudulent, and whether Mr Harding was personally liable for a negligent representation made in the agency sale.

1. The appeal was dismissed. The respondent’s notice was not accepted. Lady Justice Gloster and Lord Justice Underhill agreed with the judgment of Lord Justice Longmore.
2. The finding that the representation had been made was a finding of primary fact. The principles stated in Re B [2013] 1 WLR 1911 and referred to in Beacon Insurance v Maharaj Bookstore [2014] 2 All E.R. Comm 558 required appellate restraint. There was evidence supporting the judge’s conclusion, no misunderstanding of the evidence, and no basis for saying that no reasonable judge could have reached it.
3. The finding that the representation was negligent rather than fraudulent was also upheld. The judge had heard and assessed Mr Harding. Under Akerhielm v De Mare [1959] A.C. 789, a first-instance acquittal of fraud should be displaced only on the clearest grounds. The judge was entitled to accept that Mr Harding honestly understood “accident” to mean an accident reportable to the FAA, although he should have appreciated that the question was general and non-technical. The approach in Derry v Peek (1889) 14 App Cas 337 was preferred to the inconsistent dictum relied on from Arnison v Smith (1889) 41 Ch. D. 348. No clear grounds for interference were shown.
4. Mr Harding was not personally liable as an undisclosed principal. Where a seller acts as agent in a sale, the usual presumption is that it acts for the legal owner, rather than a beneficial owner behind that owner. It was unnecessary to look beyond the owner of the aircraft to identify the principal or to require an investigation resembling piercing the corporate veil. The claimants’ contractual route therefore failed.
5. The court refused permission to withdraw a concession of law. Although such concessions may sometimes be withdrawn, doing so here would have introduced on appeal a difficult case based on personal assumption of responsibility, without the necessary investigation of reliance or the parties’ contractual expectations. That would have been unfair to Mr Harding.

• Court of Appeal (Civil Division) — [2014] EWCA Civ 1368 . Appeal dismissed; respondent’s notice declined.
• High Court of Justice, Queen’s Bench Division, Commercial Court — judgment of Hamblen J. The citation is not stated in the judgment. The court found a negligent, non-fraudulent misrepresentation and rejected Mr Harding’s personal liability.