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Royscot Trust Ltd v Rogerson & Another (1991) CA
This case concerns the application of Section 2(1) of the Misrepresentation Act 1967. Understanding this case hinges on grasping the measure of damages awarded for negligent misrepresentation.
I. The Facts:
The Court of Appeal held that Royscot could recover £6,400 (the loan amount) less any payments received from the customer. This decision rests on two key points:
A. Measure of Damages:
This case concerns the application of Section 2(1) of the Misrepresentation Act 1967. Understanding this case hinges on grasping the measure of damages awarded for negligent misrepresentation.
I. The Facts:
- Transaction: A customer agreed to buy a used car for £7,600 from a dealer, with a £1,200 deposit and the remainder on hire purchase.
- Misrepresentation: The dealer misrepresented the deposit amount to the finance company (Royscot Trust) as £1,600 (20% of £8,000), when it was actually £1,200 (16% of £7,600). This induced Royscot to lend £6,400.
- Finance Company's Role: Royscot bought the car from the dealer and hired it to the customer.
- Breach: The customer defaulted on payments and sold the car.
- Claim: Royscot sued the dealer for damages under s 2(1) of the Misrepresentation Act 1967.
The Court of Appeal held that Royscot could recover £6,400 (the loan amount) less any payments received from the customer. This decision rests on two key points:
A. Measure of Damages:
- "So liable": The court interpreted "so liable" in s 2(1) of the Misrepresentation Act 1967 to mean liable as if the misrepresentation were fraudulent. This equates the measure of damages to that of the tort of deceit.
- Tort of Deceit: In fraudulent misrepresentation, the innocent party can recover all losses flowing from the contract, even unforeseeable ones. The customer's default was deemed foreseeable in this case, so it didn't break the chain of causation (novus actus interveniens).
- Dealer's Claim: The dealer argued Royscot suffered no loss because they acquired title to a car worth the amount they lent.
- Rejection: The court rejected this, emphasizing the commercial reality: Royscot's interest was in the customer's repayments, not the car's value. This departs from the general rule in contract law. The case of Naughton v O'Callaghan is cited as precedent for this approach.
- Academic Criticism: The House of Lords in Smith New Court Securities Ltd v Scrimgeour Vickers acknowledged the academic criticism leveled against Royscot v Rogerson and left open the question of its correctness. This suggests the decision's interpretation of s 2(1) remains a subject of debate.
- Section 2(1) Misrepresentation Act 1967: Understand the implications of this section regarding damages for misrepresentation.
- Measure of Damages: Distinguish between the measures of damages for negligent and fraudulent misrepresentation.
- Causation: Grasp the concept of novus actus interveniens and its relevance in determining liability.
- Commercial Reality: Understand how the court prioritizes the commercial purpose of a transaction over strict legal formality.
- Academic Debate: Be aware that the Royscot decision is not universally accepted within legal scholarship.
- Case Briefing: Practice summarizing the facts, holding, and reasoning of the case concisely.
- Comparative Analysis: Compare and contrast Royscot with Smith New Court Securities and Naughton v O'Callaghan. Note the similarities and differences in their approaches to damages.
- Legal Principle Application: Test your understanding by applying the principles of Royscot to hypothetical scenarios involving misrepresentation.
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