Howard Marine and Dredging Co. Ltd v A. Ogden & Sons (Excavations) Ltd. [1977] EWCA Civ 3 (13 December 1977)

A barge owner negligently misrepresented the vessel's capacity to a hirer, relying on memory of the Lloyd's Register instead of the ship's official documents. The Court of Appeal held this failed the Misrepresentation Act 1967's requirement of 'reasonable grounds' for belief.

Facts

A. Ogden & Sons (Excavations) Ltd (‘Ogden’) required barges to dispose of excavated clay at sea. They entered into negotiations to hire two German-built barges from Howard Marine and Dredging Co. Ltd (‘Howard Marine’). During these negotiations, Ogden’s manager asked for the deadweight capacity of the barges. Howard Marine’s manager, Mr Howlett, stated their capacity was 1,600 tonnes. This figure was based on his memory of an entry in the Lloyd’s Register. However, the official ship’s registration documents, which were in Howard Marine’s possession, stated the correct capacity was significantly lower, at 1,055 tonnes. The Lloyd’s Register entry was incorrect. Relying on the 1,600-tonne figure, Ogden hired the barges. The work proceeded much slower than anticipated due to the lower capacity, causing Ogden significant losses. Ogden refused to pay the full hire charge and counterclaimed for damages arising from the misrepresentation. The charterparty agreement contained a clause stating that the hirer’s acceptance of the vessel was ‘conclusive evidence’ of its fitness for service.

Issues

The central legal issues before the Court of Appeal were:

1. Whether Howard Marine’s statement regarding the barges’ capacity constituted a negligent misrepresentation under section 2(1) of the Misrepresentation Act 1967.
2. Whether Howard Marine had ‘reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true’, thereby satisfying the statutory defence under s.2(1).
3. Whether the ‘conclusive evidence’ clause in the contract was effective in excluding Howard Marine’s liability for misrepresentation, considering section 3 of the Misrepresentation Act 1967.

Judgment

The Court of Appeal, by a majority (Bridge and Shaw LJJ, with Lord Denning MR dissenting), dismissed the appeal, finding Howard Marine liable for negligent misrepresentation.

Lord Denning MR (Dissenting)

Lord Denning argued that Howard Marine did have reasonable grounds for their belief. He considered the Lloyd’s Register to be a highly authoritative and reliable source within the shipping industry, describing it as ‘the bible’. In his view, a reasonable manager would be entitled to rely on it without needing to cross-reference the ship’s own documents for a figure like deadweight capacity. He concluded that Howard Marine had discharged the burden of proof placed upon them by s.2(1) of the Act.

Bridge LJ (Majority)

Bridge LJ, delivering the leading majority judgment, focused on the heavy burden of proof imposed by section 2(1) of the Misrepresentation Act 1967. The Act reverses the common law burden of proof, requiring the representor to demonstrate they had reasonable grounds for their belief. Bridge LJ reasoned that Howard Marine had failed to discharge this burden. The manager had the correct information available in the ship’s documents but chose to rely on his memory of a different, and ultimately incorrect, source. This was not objectively reasonable. He stated:

The statute imposes a heavy burden of proof… it is for the representor to show that he ‘had reasonable ground to believe’ the facts represented. The fatal weakness in the appellants’ case, as I see it, is that they have wholly failed to explain why their responsible manager, charged with the duty of answering the respondents’ vital inquiry as to the barges’ deadweight capacity, should have thought it right to prefer the figure recalled from his memory of the Lloyd’s Register entry to the plainly accurate figure to be found in the barges’ own documents, which were available to him.

Shaw LJ (Majority)

Shaw LJ concurred with Bridge LJ. He stressed that the obligation on the representor under s.2(1) is to show not just an honest belief, but one founded on reasonable grounds. The availability and disregard of the correct, primary documentation meant that the reliance on a secondary source (the Lloyd’s Register) could not constitute reasonable grounds. Regarding the exemption clause, both majority judges held that, under section 3 of the Act, it was not fair or reasonable to allow such a clause to defeat a claim for a pre-contractual misrepresentation on a matter of such fundamental importance as the vessel’s capacity.

Implications

This case is a landmark authority on negligent misrepresentation under the Misrepresentation Act 1967. It establishes that the burden on a representor to prove ‘reasonable ground to believe’ under s.2(1) is a heavy one. The judgment makes it clear that where a representor has access to official or primary documents containing accurate information, reliance on a less reliable, secondary source (even a reputable one) is unlikely to be considered reasonable. The decision highlights the pro-claimant nature of s.2(1), which provides a powerful remedy for misrepresentation by shifting the difficult burden of proving negligence away from the victim of the misrepresentation and onto its maker.

Verdict: Appeal dismissed. The judgment in favour of Ogden & Sons (Excavations) Ltd was upheld, rendering Howard Marine liable for negligent misrepresentation.

Source: Howard Marine and Dredging Co. Ltd v A. Ogden & Sons (Excavations) Ltd. [1977] EWCA Civ 3 (13 December 1977)