Michael Griffiths & Anor v Clifton Earl Gilbert

A claim in deceit requires proof of a false representation, dishonestly made, intended to be relied on and in fact relied on. Where the alleged representation is implied, the representor must understand both that a representation is being made and the misleading sense attributed to it.

In a fixed-price building contract, approximate figures in a draft cost breakdown will not ordinarily represent the precise sums to be spent on identified items or the level of insurance cover, particularly where the recipient lacks knowledge of the insurer’s premium structure. A reply may clarify particulars of an existing cause of action rather than introduce a new one. The claim was dismissed because the alleged representations were not made.

The claimants contracted with C E Gilbert (Building Contractors) Limited for the construction of a substantial house. They alleged that the defendant, the company’s director and shareholder, fraudulently represented that an NHBC Buildmark warranty would provide cover for the full build cost of nearly £2 million.

The alleged representations arose from discussions, draft costings and later payment valuations. The defendant maintained that only standard £1 million cover had been represented and obtained. The court determined a preliminary pleading issue and then tried liability, including representation, fraud, personal liability, reliance and the effect of a letter of intent.

1. Pleading. The allegation that the NHBC cover would extend to the full build cost was sufficiently contained in the re-amended particulars, which referred to cover for the full cost of putting right damage. The more detailed allegations in the reply clarified that pleaded case and did not introduce a new cause of action. It was therefore appropriate to consider them, although amendment would have been preferable.
2. Applicable principles. Deceit requires a representation which is false, dishonestly made, intended to be relied upon and in fact relied upon. Fraud requires absence of an honest belief in the truth of the representation. For an implied or ambiguous representation, the representor must understand the representation and intend it to be understood in the misleading sense alleged.
3. Representations. The only representations made were that CEG was NHBC registered, was obtaining A1 status, would build to NHBC standards and would obtain standard Buildmark cover of £1 million, as used for the comparable Braggington development. There was no oral representation of cover for £2 million or the full build cost.
4. The figures of £7,000 and £10,500 against NHBC in the draft costings were approximate elements of a fixed-price contract. A reasonable person would not understand them as precise NHBC premiums or as representations about the level of cover. The later valuations were no different and did not represent that a particular level of cover had been obtained.
5. Since the alleged representations were not made, the questions of fraud, reliance and personal liability did not arise. In any event, the defendant did not understand that the claimants expected cover above the standard limit and did not intend them to understand that he had promised it.
6. The letter of intent was not a binding contract for the works eventually governed by the JCT contract. Had the alleged representations been made and relied upon, the letter would not have prevented reliance on them. The claim was dismissed.