Royscot Trust Ltd v Rogerson [1991] EWCA Civ 12 (21 March 1991)

A car dealer misrepresented a customer's deposit to a finance company. The customer defaulted. The court held the dealer was liable for all losses directly flowing from the misrepresentation, applying the tort of deceit measure of damages under the Misrepresentation Act 1967.

Facts

A customer, Mr Rogerson (the first defendant), wished to buy a car on hire-purchase from a car dealer (the second defendant). The total price was £7,600. The finance company, Royscot Trust Ltd (the plaintiff), had a policy requiring a minimum 20% deposit from the customer to approve finance. Mr Rogerson could only provide a £1,200 deposit, which was less than the required 20% (£1,520). To ensure the deal went through, the dealer falsely stated on the finance application form that the total price was £8,000 and the deposit paid was £1,600 (exactly 20%), leaving a balance of £6,400 to be financed. Relying on this misrepresentation, Royscot Trust entered into the hire-purchase agreement. Mr Rogerson subsequently, and dishonestly, sold the car and ceased making payments. Royscot Trust sued the dealer and Mr Rogerson to recover their loss of £3,625.24.

Issues

The central legal issue was the correct measure of damages recoverable by the plaintiff under section 2(1) of the Misrepresentation Act 1967. The question was whether damages for a non-fraudulent misrepresentation under this section should be assessed on the basis of contract (loss of bargain), the tort of negligence (foreseeable loss), or the tort of deceit (all direct losses, regardless of foreseeability).

Judgment

The Court of Appeal dismissed the dealer’s appeal, upholding the trial judge’s decision. Lord Justice Balcombe, giving the leading judgment, held that the plain language of section 2(1) of the Misrepresentation Act 1967 dictated the measure of damages. The key part of the subsection states that where a person enters a contract after a misrepresentation has been made to them by another party, “if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently”.

Balcombe LJ reasoned that the phrase “so liable” compelled the court to treat the misrepresentor as if they had been fraudulent, even if they had not been. This meant that the measure of damages should be the same as that for the tort of deceit.

In my judgment the words “so liable” in section 2(1) must be given their natural and plain meaning; they are not capable of sensible limitation or expansion. They mean that the defendant is liable in damages to the same extent as he would have been had the misrepresentation been made fraudulently.

He cited the case of Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158, which established that in an action for deceit, the defendant is liable for all the actual damage directly flowing from the fraudulent inducement, and that the loss does not have to be foreseeable. Thus, the correct measure was the more generous ‘tort of deceit’ measure.

Applying this principle, the court found that Royscot’s loss flowed directly from being induced to enter the contract by the dealer’s misrepresentation. The wrongful sale of the car by Mr Rogerson was not considered a novus actus interveniens (a new intervening act) that broke the chain of causation. The loss was a direct result of the transaction that Royscot was wrongfully induced to enter.

Implications

The decision in Royscot v Rogerson is highly significant for establishing the ‘fiction of fraud’ principle in relation to section 2(1) of the Misrepresentation Act 1967. It means a claimant suing for a negligent misrepresentation under the Act is entitled to damages as if the misrepresentation had been made fraudulently. This provides a substantial advantage to claimants, as they can recover all direct losses without having to satisfy the test of reasonable foreseeability required in the common law tort of negligence. While criticised by some academics for creating an anomaly, it remains a key authority on the calculation of damages for statutory misrepresentation in English contract law, making a claim under s.2(1) a powerful remedy.

Verdict: The appeal was dismissed. The defendant (the car dealer) was held liable for the damages claimed by the plaintiff (the finance company).

Source: Royscot Trust Ltd v Rogerson & Anor [1991] EWCA Civ 12 (21 March 1991)