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

Ogdens hired barges from Howards for excavation work after being told the barges could carry 1600 tonnes. The actual capacity was only about 1055 tonnes. The Court of Appeal held Howards liable under section 2(1) of the Misrepresentation Act 1967 as they failed to prove reasonable grounds for their belief in the accuracy of the representation.

Facts

Ogdens, contractors tendering for a sewage works excavation project in Tyneside, needed to hire seagoing barges to dump excavated material at sea. They contacted Howards, who had two German-built barges. During negotiations in April 1974, telephone conversations occurred regarding the barges’ capacity. At an interview on 11th July 1974, Mr O’Loughlin of Howards stated the barges could carry about 1600 tonnes. This figure was based on Lloyd’s Register showing 1800 tonnes deadweight, from which he deducted an allowance. However, Lloyd’s Register contained a rare error; the actual deadweight was approximately 1195 tonnes, giving a payload of only about 1055 tonnes. The German ship’s documents in Howards’ possession contained the correct figure, which Mr O’Loughlin had seen but disregarded.

The Charterparty

Though never formally signed, charterparties were concluded when the barges were delivered and accepted. These contained an exclusion clause stating that the charterers’ acceptance would be conclusive evidence that the vessels were fit for intended use.

Issues

1. Whether Howards gave a collateral warranty as to the barges’ carrying capacity.

2. Whether Howards were liable for negligent misrepresentation at common law under Hedley Byrne principles.

3. Whether Howards were liable under section 2(1) of the Misrepresentation Act 1967.

4. Whether the exclusion clause in the charterparty excluded liability.

Judgment

Collateral Warranty

The Court unanimously held there was no collateral warranty. Lord Denning MR noted that the initial offer was made subject to availability and contract, and the representations were made in circumstances inconsistent with contractual intent.

Negligent Misrepresentation at Common Law

Lord Denning MR and Bridge LJ held that the circumstances did not give rise to a duty of care at common law, as the statements were made informally without the representor having files to hand. Shaw LJ dissented, holding that the importance of the question and the relationship between the parties did impose such a duty.

Misrepresentation Act 1967

Bridge LJ (with Shaw LJ agreeing) held that section 2(1) applied. The burden was on Howards to prove they had reasonable ground to believe the representation was true. Bridge LJ analysed Mr O’Loughlin’s evidence and found that his reliance on Lloyd’s Register over the German ship’s documents was not objectively reasonable:

The fact that the deadweight figure in the ship’s documents was a freshwater figure was of no significance since, as he knew, the difference between freshwater and sea water deadweight capacity was minimal.

Lord Denning MR dissented on this point, holding that reliance on Lloyd’s Register, regarded as the Bible in shipping circles, did provide reasonable ground for belief.

Exclusion Clause

Bridge LJ held the clause should be narrowly construed and did not cover deadweight capacity, which could only be ascertained by calculation or inspection of documents. Further, under section 3 of the Misrepresentation Act 1967, the judge had found reliance on such a clause was not fair and reasonable, and the Court of Appeal would not disturb that exercise of discretion. Lord Denning MR disagreed, considering the clause fair and reasonable between commercial parties of equal bargaining power.

Implications

This case is significant for clarifying the operation of section 2(1) of the Misrepresentation Act 1967. It establishes that once a misrepresentation inducing a contract is proved, the burden shifts to the representor to prove reasonable grounds for belief in its truth. The standard is objective reasonableness, not merely honest belief. The case also demonstrates the courts’ approach to exclusion clauses under section 3 of the Act and confirms the narrow construction applied to such clauses.

Verdict: Appeal allowed by majority. Howards held liable under section 2(1) of the Misrepresentation Act 1967 for the misrepresentation made at the July interview. The judgment below was varied accordingly.

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