Glossop Cartons and Print Ltd & Ors v Contact (Print and Packaging) Ltd & Ors

Fraudulent misrepresentation requires a false representation, knowledge of falsity or reckless absence of belief in its truth, an intention that it be relied upon, actual reliance, and resulting loss. The mental element remains substantially subjective; an objective assessment of dishonesty cannot replace the requirement that the representor understood the representation being made. A representation need only be an inducing cause, not the sole cause, of the transaction. In deceit, damages may include all loss directly flowing from the transaction, subject to reasonable mitigation and exclusion of losses already appreciated and reflected in the price. A fraudulent representation affecting a global package of interdependent agreements may support claims by parties to different agreements where the representation induced the package as a whole.

The claimants acquired Contact’s business and assets and three commercial units under linked agreements. They alleged fraudulent or negligent misrepresentations concerning the electricity supply, drainage and flooding, and a boundary fence, together with contractual warranty and indemnity claims.

The court determined liability and principles governing loss and damage. It also considered an indemnity claim arising from the settlement of an equal pay claim brought by a former employee. Damages and further expert accounting evidence were left for a later stage.

1. Electricity supply representation. The defendants’ undertaking to disconnect the existing electricity supply to Unit 3 was contractually binding. The 13 November email and related replies misleadingly presented the proposed re-routing as a matter within Mr Smith’s discretion and concealed the undertaking. The representation was fraudulent, intended to induce reliance, relied upon, and an inducing cause of the linked agreements. The fraud claim therefore succeeded against all three defendants.
2. Electricity power representation. No representation was made that Unit 3 had a Major Supply or sufficient power for the proposed digital machinery. The circumstances relied upon did not amount to clear words or conduct from which such a representation could be implied. The claimants should have investigated the supply themselves. The fraud and negligent misrepresentation claims failed, and the contractual exclusion of informal or implied representations was reasonable under section 3 of the Misrepresentation Act 1967.
3. Flooding representation. The email gave only a partial account of continuing investigations and remedial works. It falsely represented that the underlying causes had been identified and were being addressed. The representation was fraudulent and a material inducing cause of the transaction. The fraud claim succeeded.
4. Fencing representation. The email misstated an obligation to reposition the fence as a right, but the misstatement was immaterial and Mr Smith genuinely believed it. No actionable fraudulent or negligent misrepresentation, or recoverable warranty loss, was established.
5. Damages and indemnity. The relevant valuation date was 11 December 2015. Damages for deceit comprise full reparation for loss directly flowing from the global transaction, subject to reasonable mitigation. The burden of proving failure to mitigate lies on the wrongdoer. Glossop was entitled to a contractual indemnity for the reasonable settlement and associated legal costs of the Brammall equal pay claim.