Lloyd's Maritime and Commercial Law Quarterly
DECEIT, DAMAGES AND THE MISREPRESENTATION ACT 1967, S. 2(1)
Ian Brown * and Adrian Chandler **
“O, what a tangled web we weave, when first we practise to deceive!”
†
Introduction
Section 2(1) of the Misrepresentation Act 1967 imposed a radical liability, yet, almost a quarter of a century later, its boundaries remain enigmatic. It was in 1962, before the decision in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd.,1 that the Law Reform Committee2 recommended that damages should be available for loss caused by negligent misrepresentations which induced contracts, the previously entrenched position being that only deceit or breach of a contractual term incurred such liability. Regrettably, s. 2(1) made an arcane and circuitous reference to the tort of deceit, this “fiction of fraud” being a notion which had not been deployed by the Law Reform Committee but which posed the potential problems first adverted to by Atiyah and Treitel.3
The extent to which the tort of deceit and its consequences intrude upon s. 2(1) has always been uncertain. In attempting to clarify the law, three recent decisions4 have raised controversial issues regarding the applicable measure of damages. In particular, questions remain regarding both the availability and desirability of the plaintiff’s claim to utilize the particularly beneficial and stringent rules of deceit in cases other than those of actual fraudulent misrepresentation. If a plaintiff representee may avail himself of the tests of remoteness and measure of damages applicable to deceit in an action for negligent misrepresentation under s. 2(1), he has an immediate and obvious advantage. When this supremacy is matched by the reversed burden of proof in the section, it is plain to see why actions of deceit at common law are virtually redundant and, in situations where a contract results between the parties, an action in negligence under Hedley Byrne is needlessly burdensome.
* Senior Lecturer in Law and Research Fellow in Commercial Law, Bristol Polytechnic.
** Principal Lecturer in Law, Bristol Polytechnic. We are indebted to our colleague James Holland for his helpful comments on an earlier draft of this article.
† Sir Walter Scott, Marmion, vi, xvii.
1. [1964] A.C. 465.
2. L.R.C., 10th Report, Innocent Misrepresentation, Cmnd. 1782 (1962).
3. “Misrepresentation Act 1967” (1967) 30 M.L.R. 396, 372–375. Four potential areas of difficulty were delineated by the authors, viz.: (i) the measure of damages under s. 2(1) might be that applicable to an action in deceit; (ii) certain difficulties could be engendered by the notion of composite fraud in agency; (iii) the rules in relation to inducement and fraud are unique to actions in fraud; and (iv) the extended period of limitation applicable to actions in fraud might be available under s. 2(1).
4. Naughton v. O’Callaghan [1990] 3 All E.R. 191; Royscot Trust Ltd. v. Rogerson [1991] 3 W.L.R. 57; Cemp Properties (U.K.) Ltd. v. Dentsply Research and Development Corp. [1991] 34 E.G. 62.
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