Salt v Stratstone Specialist Ltd (t/a Stratstone Cadillac Newcastle)

Damages under section 2(2) of the Misrepresentation Act 1967 may be awarded in lieu of rescission only where rescission is, or was, available. Where practical justice can be achieved by an account or compensation, rescission is not defeated by registration of goods, depreciation, or the buyer’s use of them.

The representor must prove any allowance sought for depreciation or use. Mere delay does not bar equitable rescission. The delay must make relief inequitable, having regard to waiver, knowledge, prejudice and the balance of justice.

The claimant bought a Cadillac represented as brand new. It had in fact been manufactured over two years earlier, had been repaired and had previously been involved in a collision. He relied on the representation and later discovered its true age and history through disclosure in proceedings.

A District Judge awarded damages of £3,250, holding that rescission was impossible. On appeal, HHJ Harris QC ordered rescission, repayment of the purchase price against return of the car, and later awarded indemnity costs. The seller appealed both orders.

The central issues were whether rescission remained practically possible, whether damages could be awarded under section 2(2) of the Misrepresentation Act 1967, whether delay barred rescission, and whether the costs order could be varied after its oral pronouncement.

1. Appeals dismissed. The court upheld the order rescinding the sale and the subsequent indemnity-costs order.
2. Section 2(2) of the Misrepresentation Act 1967 confers a discretion to award damages in lieu of rescission only where the claimant would be entitled to rescind. If rescission has been lost through affirmation, intervening third-party rights, excessive delay or true impossibility of restitution, damages cannot be awarded under that subsection. The District Judge had therefore approached the supposed choice between rescission and section 2(2) damages on a wrong basis.
3. Rescission was available. Registration did not alter the car’s physical identity. Nor did depreciation or the claimant’s intermittent use make restitutio in integrum impossible. Following the practical-justice approach in Erlanger and the compensation principle recognised in Lagunas, the court could order an account or compensation rather than exact restoration. Rescission was the normal remedy and was appropriate on these facts.
4. Once the misrepresentee establishes a prima facie right to rescission, the representor must assert and prove any entitlement to compensation for depreciation or use. The absence of such evidence did not prejudice the claimant, who would not have bought the troublesome older car but for the representation.
5. Delay did not bar relief. Per Roth J, equitable rescission is barred only by delay making relief inequitable under the doctrine of laches. The claimant could not reasonably have discovered the vehicle’s history before disclosure, and subsequent delay substantially arose from the litigation and the seller’s refusal to accept return of the car. Leaf was distinguishable and its pre-statutory alignment of rescission with contractual rejection was doubtful after section 1 of the Misrepresentation Act 1967.
6. The judge could vary the orally pronounced costs order before entry and perfection. CPR 40.12(1) was inapplicable, but the general power under CPR 3.1(7), as preserved by Re Barrell Enterprises, was available. Indemnity costs were justified by the seller’s failure to accept the claimant’s early settlement offer.

• Court of Appeal (Civil Division) — In [2015] EWCA Civ 745, dismissed the seller’s appeals against the rescission order and the indemnity-costs order.
• County Court at Oxford, HHJ Charles Harris QC — Allowed the buyer’s appeal from the District Judge, ordered rescission and repayment of the price against return of the car, and subsequently varied costs to an indemnity basis.
• County Court at Milton Keynes, District Judge Hickman — Held rescission unavailable and awarded £3,250 damages for misrepresentation and inconvenience.