B e f o r e :
THE RIGHT HONOURABLE LORD JUSTICE LONGMORE
THE RIGHT HONOURABLE LORD JUSTICE PATTEN
THE HONOURABLE MR JUSTICE ROTH
|| GEOFFREY ALAN SALT
||- and -
||STRATSTONE SPECIALIST LIMITED T/A STRATSTONE CADILLAC NEWCASTLE
Mr Edward Rowntree and Mr Thomas Bell (instructed by Geldards LLP) for the Appellant
Mr Kavan Gunaratna (instructed by Coyle White Devine Solicitors) for the Respondent
Hearing dates: 25th June 2015
HTML VERSION OF JUDGMENT
Crown Copyright ©
Lord Justice Longmore:
- In what must now be called the very old days, courts could not award damages for misrepresentations which had not become terms of the contract. The only available remedy for non-fraudulent misrepresentation was rescission which, because it was a remedy given by courts of equity rather than common law courts, was subject to the restriction that the Court of Chancery could not normally make awards of damages. After the fusion of law and equity in 1873, all courts could award rescission but that remedy was still subject to the fact that a claim for misrepresentation did not sound in damages. Conversely, if a misrepresentation did become a term of the contract and damages could be awarded, it would usually be said that rescission was not available.
- The remedy of rescission was also regarded as a mutual remedy; if a buyer wished to rescind the contract and recover the price which he had paid, he had to restore the article bought. If such restoration was impossible because the article had been consumed or changed in some important way, the remedy of rescission was barred because, as lawyers used to say, restitutio in integrum was impossible. Similarly, the interposition of third party rights and lengthy delay were regarded as bars to rescission.
- All this changed with the Misrepresentation Act 1967 ("the Act"). Section 1 of the Act provided that rescission was available even if the misrepresentation had become a term of the contract. Section 2 of the Act gave the courts a power to award damages for misrepresentation in the following terms:-
"2. Damages for misrepresentation
(1) Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, 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, unless he proves that he had reasonable grounds to believe and did believe up to the time the contract was made that the facts represented were true.
(2) Where a person has entered into a contract after a misrepresentation has been made to him otherwise than fraudulently, and he would be entitled, by reason of the misrepresentation, to rescind the contract, then, if it is claimed, in any proceedings arising out of the contract, that the contract ought to be or has been rescinded the court or arbitrator may declare the contract subsisting and award damages in lieu of rescission, if of opinion that it would be equitable to do so, having regard to the nature of the misrepresentation and the loss that would be caused by it if the contract were upheld, as well as to the loss that rescission would cause to the other party.
- In the present case, District Judge Hickman thought damages was more appropriate than rescission but His Honour Judge Harris QC took the opposite view and held the claimant was entitled to rescind the contract and recover the price which he had paid.
- Mr Geoffrey Alan Salt was and is a car enthusiast with an interest in luxury and sports vehicles. He lived in Chesham at the material time and owned various vehicles such as Cadillacs, BMWs and Jaguars. In early September 2007 a Ms Michelle Harlow, an employee of Stratstone Specialist Ltd ("Stratstone") in north-east England telephoned Mr Salt and offered to sell to him a Cadillac CTS 3.6 litre Sport Luxury car ("the vehicle") which she described as "brand new". On 7th September 2007 Mr Salt agreed on the telephone to buy the vehicle for £21,895 and it was delivered to him on 29th September 2007.
- The vehicle was not brand new because, although it had never had a registered owner, it had been manufactured in 2005 and delivered to Stratstone on 23rd March 2005. It had had various repairs in the course of 2005 and 2006 and had been involved in a collision serious enough to have damaged the front wheels and caused the nearside front tyre to split. District Judge Hickman found as a fact that Mr Salt relied on the misrepresentation that the vehicle was brand new and would not have bought it if he had been aware of its age and history.
- The vehicle had numerous defects which begun to emerge after Mr Salt had bought it. There were problems with the ignition, the battery, the catalytic converter, the oil warning light, the windscreen wipers and the satellite navigation system. The filter on the petrol intake proved to be defective and Mr Salt was, on one occasion, stranded while using the vehicle. Stratstone repaired some (if not all) of these defects but by 16th September 2008 Mr Salt had had enough, tried to reject the vehicle and asked for his money back. Stratstone refused to reimburse him, so on 24th March 2009 Mr Salt issued proceedings complaining that the car was not of merchantable quality and seeking damages. In September 2009 he stopped using the vehicle and completed a statutory off-road notice declaration. He has not used the vehicle since.
- The claim was allocated to the fast track and on 16th February 2010 it was stayed, for a period ending one month after receipt of the report of the single expert employed in the case, so as to facilitate settlement negotiations.
- Thereafter documents disclosed by Stratstone on discovery revealed that the vehicle was not new; Mr Salt complained about this in correspondence in November 2010 and on 19th May 2011 Mr Salt served amended particulars of claim claiming misrepresentation and rescission.
- The trial took place before District Judge Hickman in the County Court at Milton Keynes. He decided that he could not order rescission because he could not put the parties back in their original position and that restitutio in integrum was impossible. That was because the car had now been registered and could not be returned as an unregistered car; there had been a considerable lapse of time since the sale and he could not adjust the amount of the price that would be repayable to allow for the depreciation of the vehicle. He held that Mr Salt was confined to a remedy in damages which, in reliance on the expert evidence of Mr Ward, he assessed at the difference between the value of the car at the time of sale if it had been new (£22,000.00) and the actual value of the car at the time of purchase (£19,000.00) together with £250.00 for the inconvenience caused by the defects which needed repair. He therefore gave judgment for Mr Salt for £3,250.00.
- Mr Salt appealed and His Honour Judge Charles Harris QC sitting in Oxford reversed the District Judge, holding that it was possible to restore the parties to their original position. The car still existed; the fact of registration could not be a bar to rescission; any difference in value of the car should be at the risk of the misrepresentor not the misrepresentee; and any delay was not so long as to operate as a bar to rescission. He therefore ordered rescission and the repayment of the purchase price in exchange for the return of the car. He gave Mr Salt his costs but, by a later judgment, amended that order to give him his costs on an indemnity basis because, before he issued proceedings, he had offered to accept £4,000.00 in settlement. Stratstone now appeals.
- It is perhaps an unfortunate feature of the case that the fundamental difference of approach between District Judge Hickman and His Honour Judge Harris has to be assessed in the context of a case allocated to the fast track in which the sums at stake are comparatively small. Questions of onus of proof in the absence of evidence may assume an importance which they would not have if the claim had been fought in the High Court with substantial sums at stake.
- Leaving aside the appeal on costs, there are four grounds of appeal:-
i) DJ Hickman exercised a discretion under section 2(2) of the Act, with which HHJ Harris should not have interfered;
ii) restitutio in integrum was impossible;
iii) damages in the sum of £3,250.00 was an adequate remedy; and
iv) delay of nearly 4 years between the contract of sale and the seeking of rescission was a bar to relief as it had been in Leaf v International Galleries  2 KB 86.
Exercise of discretion under section 2(2)
- DJ Hickman did not say in terms that he was exercising his discretion to award damages under section 2(2) but he seems to have thought the choice open to him was to award rescission or damages. He could, if he had wished, have used his powers under section 2(1) which enables a court to award damages unless the misrepresentor proves he had reasonable grounds to believe (and did believe) that the misrepresentation was true. Stratstone made no attempt to prove that it did have such reasonable grounds and might have been held liable in damages without prejudice to the question whether rescission was available as a remedy. In this respect section 2(1) equates a negligent misrepresentation with a fraudulent misrepresentation. Section 2(2), entitling the court to award "damages in lieu of rescission", applies if a representation is either negligent or innocent. It is then that any discretion arises but it only arises when the misrepresentee
"would be entitled … to rescind the contract."
If (as DJ Hickman held) restitution would be impossible and the right to rescission had therefore been lost, it is difficult to say that Mr Salt "would be entitled to rescind" the contract. On that basis damages would not be available any more than rescission was.
- This raises the much discussed question whether section 2(2) is available at all if there is a bar to rescission; it is a question on which there is a conflict of authority at first instance. In Alton House Garages (Bromley) Ltd v Monk 1981) (unreported) Cantley J decided that, if rescission was barred, damages were not available; Mustill J seems to have assumed that this was the position in Atlantis Lines and Navigation Co Inc v Hallam Ltd  1 Lloyds Rep 188, 202. Jacob J adopted the contrary view in Thomas Witter Ltd v TBP Industries Ltd  2 All E R 573 after Mr David Foxton of counsel, with commendable industry, unearthed a statement from the Solicitor General (Sir Dingle Foot) during the passing of the Act through Parliament which assumed that unavailability of rescission would not prevent damages. As Professor Hugh Beale points out in his note on the case ((1995) 111 LQR 385), however, Sir Dingle's statement was not wholly free from ambiguity which was perhaps not wholly surprising since he rose to speak at 3.17 a.m. when the House of Commons had been sitting since the previous morning.
- Subsequently HHJ Humphrey Lloyd QC sitting in the Technology and Construction Court in Floods v Shand Construction  BRL 81 refused to follow Thomas Witter on the basis that the literal meaning of the statute was too clear. So did HHJ Raymond Jack QC (as he then was) sitting as a High Court Judge in Government of Zanzibar v British Aerospace Ltd  1 WLR 2333, 2342-4. Mr Rex Tedd QC sitting as a Deputy Judge of the Chancery Division followed these last two decisions in Pankhania v London Borough of Hackney  EWHC 2441 (Ch) rather than continuing a potentially endless chain of judicial reconsideration of the same point at first instance.
- The point appears to be open at the level of the Court of Appeal. The words of the statute are "if it is claimed … that the contract ought to be or has been rescinded the court … may declare the contract subsisting and award damages in lieu of rescission". No doubt a claimant can be said to make a claim even if he is subsequently held not to be entitled to do so. But the words "in lieu of rescission" must, in my view, carry with them the implication that rescission is available (or was available at the time the contract was rescinded). If it is not (or was not available in law) because e.g. the contract has been affirmed, third party rights have intervened, an excessive time has elapsed or restitution has become impossible, rescission is not available and damages cannot be said to be awarded "in lieu of rescission".
- On the hypothesis, therefore, that DJ Hickman was correct to say that restitutio in integrum was not possible, the discretion under section 2(2) to award damages was not available to him. Any discretion he may have had was exercised on a wrong basis. But the next question is whether restitution was in truth impossible.
- The first reason given by DJ Hickman is that the car had been registered to Mr Salt after sale and that returning a registered car would be to return something different from the article he bought. If that were right, it would always be impossible to rescind a contract for a car which was wrongly said to be new. I cannot accept that; registration is a legal concept which does not change the physical entity that a car is.
- DJ Hickman's second reason for saying that the parties could not be restored to their original position is that there had been some delay, but he did not appear to have regarded that as critical since he said that the relevant delay was up to the point when the claim for rescission was asserted rather than when it was pleaded. That is, of course, right; nevertheless Stratstone say as their fourth ground of appeal that the delay in this case is a fatal bar and I will have to return to that ground.
- DJ Hickman's third reason is that a car is a depreciating asset and that the delay (such as it was) constituted a prejudice to Stratstone. But it would be comparatively easy to compensate Stratstone for that prejudice. A further point that DJ Hickman might have made (but did not make) is that Mr Salt had had the benefit of using the car. While it was true that the car had in many respects been unsatisfactory and needed repair, Mr Salt did use it between the date of its delivery in September 2007 and the date when he stopped using the car and signed the statutory off road declaration in September 2009; the use may have been somewhat intermittent but undoubtedly did occur.
- But neither depreciation not intermittent enjoyment should, in my view, be regarded as reasons for saying restitution is impossible. It has always been the case that a court of equity, contemplating rescission, could order an account and/or an inquiry to determine the terms on which restitution should be made, see Chitty, Contracts, 31st edition para 6-120ff and Cartwright, Misrepresentation, Mistake and Non-Disclosure (3rd ed. 2012) para 4-52ff.
- DJ Hickman seems to have been aware of this because he said:-
"If I had been provided with the evidence to allow me to make an assessment of the position, it might perhaps have been possible to direct rescission on a partial rather than a complete refund of the purchase price that Mr Salt paid. But I do not have that evidence. For the reasons I gave in refusing to permit re-amendment of the particulars of claim, I am not going to take a course which would entail the obtaining of further evidence, and frankly, given the extreme unlikelihood on past history of these parties agreeing on anything, a further hearing. This case has already become utterly disproportionate in terms of the parties' costs and in terms of the call on the court's resources. Again, some assessment of that position might have formed the basis for a sensible mediated settlement, but that did not happen."
Judge Harris QC took the contrary view saying:-
"Manifestly a good deal of time has now gone by, but it is clearly the case that the defendants could be given back what they sold, namely the car. It has in fact not been driven since September 2009, such was its unreliability. It is no doubt worth less than it was at the time of the sale, especially as it has covered some 15,000 miles, but neither party seems to have called any evidence about this. Since that sale was only achieved by misrepresentation, it could be said to be equitable, that is fair, for the seller to bear this loss rather than the claimant, who if he had not been deceived would never have bought the car in the first place, and who because of the defendant's misrepresentation acquired a two and a half year old car which was troublesome instead of a sound new one."
(I do not, contrary to Mr Rowntree's submission, consider that the judge found that the representation made by Stratstone was deceitful; he was merely saying that Mr Salt had been deceived by a representation that was factually incorrect.)
- I agree with the approach of Judge Harris. The normal remedy for misrepresentation is rescission, see Chitty, Contracts para 6-108 and British and Commonwealth Holdings v Quadrex  C.L.C. 1169, 1199-1200. This remedy should be awarded if possible, particularly perhaps in a case in which a defendant makes no attempt to prove that he had reasonable grounds to believe its representation was true.
- The principle enunciated by Lord Blackburn in Erlanger v New Sombrero Phosphate Company (1878) 3 App. Cas. 1218, 1278-9 (albeit in a case where the company was seeking to set aside a contract made with promoters who were in a fiduciary relationship with the company) has consistently been applied to cases to rescission for misrepresentation:-
"It would be obviously unjust that a person who has been in possession of property under the contract which he seeks to repudiate should be allowed to throw back on the other party's hands without accounting for any benefit he may have derived from the use of the property, or if the property, though not destroyed, has been in the interval deteriorated, without making compensation for that deterioration. But as a Court of Law has no machinery at its command for taking an account of such matters, the defrauded party, if he sought his remedy at law, must in such cases keep the property and sue in an action for deceit, in which the jury, if properly directed, can do complete justice by giving as damages a full indemnity for all that the party has lost: see Clarke v Dixon, and the cases there cited.
But the Court of Equity could not give damages, and, unless it can rescind the contract, can give no relief. And, on the other hand, it can take accounts of profits, and make allowance for deterioration. And I think the practice has always been for a Court of Equity to give this relief whenever, by the exercise of its powers, it can do what is practically just, though it cannot restore the parties precisely to the state they were in before the contract."
He added (page 1283) that once the misrepresentee showed a right to relief the burden is on the misrepresentor to show that the misrepresentee has precluded himself from that relief.
- Erlanger was followed in the decision of this court in Lagunas Nitrate Co. v Lagunas Syndicate  2 Ch 392 in which Rigby LJ observed (page 456) that deterioration in property purchased was no bar to rescission but only a ground for compensation. He added at page 457:-
"The obligation of the vendors to take back the property in a deteriorated condition is not imposed by way of punishment for wrongdoing, whether fraudulent or not, but because on equitable principles it is thought more fair that they should be compelled to accept compensation than that they should go off with the full profit of their wrongdoing. Properly speaking, it is not now in the discretion of the Court to say whether compensation ought to be taken or not. If substantially compensation can be made, rescission with compensation is ex debito justitiae."
These passages were cited with approval in the House of Lords in Spence v Crawford  3 All E.R. 271  S.C. (H.L.) 52 by Lord Thankerton.
- Both Lagunas and Spencer were cases of fraud but as Lord Wright pointed out in the latter case, the same principles were applied in Adam v Newbigging (1888) 13 App. Cas. 308 where the representation was innocent rather than fraudulent and the shares, which were the subject matter of the contract, had become worthless. No one suggests that the Cadillac in the present case had become worthless.
- Lord Blackburn's emphasis on "what is practically just" has also been applied in cases of duress and undue influence, see Halpern v Halpern  QB 195 particularly at paras 61-75 per Carnwath LJ who cites Treitel's Law of Contract (11th ed. (2003) page 380 (now 13th ed. (2011 ) para 9-101) as saying:-
"the essential point is that the representee should not be unjustly enriched at the representor's expense; that the representor should not be prejudiced is a secondary consideration."
- In my view, therefore, Mr Salt should be entitled to rescind the contract. It is not clear what DJ Hickman would have done, if he had appreciated he had no discretion to award damages under section 2(2) of the Act. He might have proceeded in any event to award damages under section 2(1) of the Act but he did not do that in terms. He appears to have set his face against what he called partial rescission by an order to refund only part of the purchase price because he did not have the evidence to enable him to do so. Presumably he had in mind the amount of depreciation and (perhaps) the value of the use which Mr Salt had had of the car. That must presuppose that it was for Mr Salt as claimant to provide such evidence. That did not trouble Judge Harris who thought Mr Salt should be entitled to rescind even in the absence of such evidence since he would never have bought the car but for Stratstone's misrepresentation.
- On this I agree with Judge Harris. Rescission is prima facie available if "practical justice" can be done. If "practical justice" requires a representor to be compensated for depreciation, it is for the representor so to assert and prove; likewise if the representor asserts that use of the car is to be taken into account, which may well be difficult if the car was as "troublesome" (to use Judge Harris's words) as this Cadillac was. The absence of evidence about depreciation or the value of the use of the car should not operate to the disadvantage of the representee who should never have been put in the position of having a troublesome old car rather than a brand new one.
Sufficiency of damages
- I would reject this ground of appeal. If I am right that rescission should (still) be the normal remedy for misrepresentation, unless restitution is truly impossible, Mr Salt should be able to recover the price which he paid of £21,895.00. Damages of £3,250.00 are not a sufficient compensation for the wrong which he has suffered.
Lapse of time
- The authority usually cited under this head is Leaf v International Galleries  2 KB 86 in which the claimant in 1944 bought a picture of Salisbury Cathedral represented to be by "J. Constable" for £85.00. It is a somewhat curious case since one would think that a genuine Constable painting of Salisbury Cathedral, even in 1944, would be worth considerably more than £85.00, quite apart from the fact that in auctioneers' terminology "J Constable" is a representation very different from "John Constable". Be that as it may, this court did not permit rescission in 1949 partly in the light of the considerable delay between purchase and the action and partly because it held that a representor should not be in a worse position than someone who had made it a term of the contract that the picture was by Constable. If, therefore, lapse of time prevented the claimant purchaser from rejecting the picture and claiming damages for non-delivery, a representee should be in no better position. Section 35 of the Sale of Goods Act 1893 provided that the buyer was deemed to have accepted the goods "when after a lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them". The Sale of Goods Act now provides (1) that a buyer is not deemed to have accepted the goods until he has had a reasonable opportunity of examining them for the purposes of ascertaining whether they are in conformity with the contract and (2) that the question that is material for the purposes of determining whether a reasonable time has elapsed (with the result that the buyer is to be deemed to have accepted the goods) includes the question whether the buyer has had such reasonable opportunity for examining the goods.
- No point was taken at trial raising the question whether Mr Salt was, as a matter of fact, entitled to reject the car because DJ Hickman refused an application by Mr Salt to amend his pleadings to take the point. The court was thus left in ignorance whether a reasonable time had elapsed without Mr Salt having rejected the goods. For that purpose it would be relevant to inquire whether it was possible by reasonable examination of the car to tell whether it was new or not. One suspects not, since Mr Salt only became alive to the point after disclosure of documents had taken place. In any event, it would not be fair on Mr Salt to allow Stratstone now to rely on a suggestion that, because he was too late to reject the car, he was likewise too late to rescind the contract.
- It must, moreover, be remembered that Leaf was decided well before the Misrepresentation Act was passed. It must be doubtful whether since the enactment of section 1 it is still good law that a representor should be in no worse position than if the representation had become a term of the contract, particularly if the representor takes no steps to prove that he was not negligent.
- In all the circumstances, it does not seem to me that lapse of time on its own can be a bar to rescission in this case. As DJ Hickman pointed out, the ground on which rescission became available only became known to Mr Salt on disclosure of documents. Most of the subsequent delay has been due to the litigation process and Stratstone's wrongful refusal to take the car back and return the price.
- On 6th August 2014 HHJ Harris orally pronounced an order awarding costs to Mr Salt on the standard basis. Counsel then representing Mr Salt remembered within 2 or 3 hours that she had failed to inform the judge that Mr Salt had made an offer to settle the proceedings for £4,000.00 as long ago as 13th January 2009. She therefore emailed the judge asking him to "confirm" whether costs incurred since 5th February 2009 were to be assessed on an indemnity basis. Judge Harris was quite rightly not prepared to give any such confirmation without argument but, having heard argument, on 20th November 2014 he made the order as requested. He held that it was not a case for the slip rule – CPR 40.12(1) - but that he had the requisite power under CPR 3.1(7):-
"The power of the Court under these Rules to make an order includes a power to vary or revoke the order."
- Mr Rowntree submitted to us that the judge had no such powers once he had orally pronounced his order. Alternatively he submitted relying on Tibbles v SIG Plc  1 WLR 2591, that the power only existed "to deal with something which, once the question is raised, is more or less obvious on the materials before the court" per Rix LJ at para 41.
- I cannot accept these submissions. It has been recognised since Re Barrell Enterprises  1 WLR 19 that a court has power to alter the terms of its order at any time before it is entered and perfected. This power has survived the introduction of the CPR, see para 40.2.1 of the White Book. In Tibbles the order had been entered and perfected months before the application to vary had been made. In this case the application to vary was, in any event, made within hours of the oral pronouncement of the order.
- Secondly, the answer to the application was, anyway, more or less obvious. It was a case that cried out for settlement. Mr Salt had tried to settle it at an early stage (as well as at later stages). Stratstone played for high stakes and has lost. It is self-evident that they should pay indemnity costs as Mr Rowntree very fairly recognised if he was wrong about jurisdiction.
- I would dismiss this appeal.
Lord Justice Patten:
- I agree.
Mr Justice Roth:
- I agree. I add this brief judgment on the issue of lapse of time, which was addressed in some detail by Judge Harris QC.
- As Longmore LJ has explained, rescission for misrepresentation is an equitable remedy. Absent a statutory bar, an objection to rescission must therefore rest on an equitable basis. Accordingly, it is something of a misnomer to say that rescission may be barred by lapse of time. It is only the lapse of a reasonable time such that it would be inequitable in all the circumstances to grant rescission which constitutes a bar to the remedy. This is in essence the principle of laches, which accordingly requires close attention to the facts of the case.
- The classic statement of the principle is that expressed by Lord Selborne LC, in Lindsay Petroleum Co. v Hurd (1873-74) LR 5 PC 221 at 239-240:
"Now the doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy."
This passage was recently approved by the House of Lords in Fisher v Brooker  UKHL 41: see the judgment of Lord Neuberger at , with which all the other members of the Appellate Committee agreed.
- In Adam v Newbiggin (1888) 13 App. Cas. 308, the respondent agreed in February 1883 to take a share in the appellant's existing manufacturing business. That agreement was induced by serious misrepresentations contained in a report given to the respondent concerning the value and condition of the machinery and the profitability of the business. However, there was no suggestion of fraud, the respondent had little commercial experience and it was only in August 1884 that he became suspicious and began investigations, which led to him to discover the true position and make a claim for rescission. The House of Lords held that the respondent was entitled to rescind the agreement. Lord Watson stated, at 320:
"It cannot be reasonably suggested that he ought to have known these facts before his suspicions were awakened in August 1884; and he then made a searching investigation of the affairs of the partnership, which resulted in his bringing suit against the appellants in November 1884."
And Lord Herschell, in discussing the various grounds on which it was contended that rescission should not be granted, said at 330-331:
"I am, of course, putting aside any question of laches, for there is no pretence in the present case for saying that the discovery would have been made earlier had there been due diligence on the part of the respondent."
- The well-known decision of this court in Leaf v International Galleries  2 K.B. 86, is to be read in that overall context. The facts have been summarised in the judgment of Longmore LJ. Although the only remedy sought was rescission, the assertion that the painting was by Constable was also a term of the contract and, in the leading judgment, Denning LJ held that that it was to be decided according to the principles applicable to the sale of goods. He found that the buyer had accepted the goods by reason of a lapse of time, thereby losing his right to reject. If the buyer had lost the right to reject the goods under the contract he could be no better off in seeking rescission for innocent misrepresentation.
- Accordingly, I think the ratio of Denning LJ's judgment is that if the buyer is deemed to have accepted the goods by reason of a lapse of time, that would bar the right to rescind for an innocent misrepresentation. Although he agreed with that judgment, it is notable that Jenkins LJ stated that in "contracts such as this" it was for the purchaser to take steps to satisfy himself as to the authenticity of the work within a reasonable time if he wished to exercise the remedy of rescission. And Lord Evershed MR emphasised the difficulty of attribution of works of art and accordingly expressed concern at the possibility of a divergent view emerging many years after purchase.
- In the present case, as Longmore LJ points out, it is possible that Mr Salt may not have lost his contractual right to reject by lapse of time in any event: that issue was not decided since the District Judge understandably refused leave to raise that point by way of a late re-amendment of the claim. The grounds on which a right to reject goods for breach of condition is lost have been significantly qualified since Leaf was decided, by the Sale of Goods Act 1979 (as amended). But in any event, this was, on the findings of the courts below, at least a negligent misrepresentation by the employee of Stratstone. It was not suggested that Mr Salt should reasonably have discovered the true age of the car before documents revealing the position were provided on disclosure in the proceedings. In those circumstances, I think that Judge Harris was clearly correct in concluding that there was no undue delay on the part of Mr Salt.
- I would add that in contracts for the supply of goods to a consumer, such as Mr Salt, the right to reject for breach will be more complex in future when the Consumer Rights Act 2015 comes into force: see in particular sections 20-24. Whatever the position under the current law, I think that it will then no longer be possible to align the equitable right to rescind for pre-contractual misrepresentation with the statutory scheme governing contractual rights.
- In the present case, having held, contrary to the District Judge, that there was no bar to rescission, it was then for the court below to determine whether it would here be equitable to award damages to Mr Salt in lieu under section 2(2) of the Misrepresentation Act 1967. Judge Harris explained why on the facts he considered that the justice of the case required rescission notwithstanding the court's inability for lack of evidence to order some compensation or account for Mr Salt's use of the car in covering about 15,000 miles. I consider that this conclusion cannot be faulted.
IN THE COURT OF APPEAL CIVIL DIVISION Appeal ref: B2/2014/2871 & B2/2014/0879
ON APPEAL FROM
THE COUNTY COURT AT OXFORD
HIS HONOUR JUDGE CHARLES HARRIS QC
BEFORE LORD JUSTICE LONGMORE
LORD JUSTICE PATTEN
MR JUSTICE ROTH
STRATSTONE SPECIALIST LIMITED TA STRATSTONE CADILLAC NEWCASTLE
- and -
GEOFFREY ALAN SALT Respondent
UPON the Appellant's appeal against the order of HHJ Harris QC made on 6th August 2014, brought by appellant's notice filed on 27th August 2014 (B2/2014/2871)
AND UPON the Appellant's appeal against the order of HHJ Harris QC made on 20th November 2014, brought by appellant's notice filed on 10th March 2015 (B2/2015/0879
AND UPON reading the papers
AND UPON hearing Mr Edward Rowntree of Counsel leading Mr Thomas Bell of Counsel for the appellant and Mr Gunaratna of Counsel for the respondent at the hearing of both appeals on 25th June 2015
IT IS ORDERED that:
1. The Appellant's appeal against the order of 6th August 2014 be dismissed.
2. The Appellant's appeal against the order of 20th November 2014 be dismissed.
3. The Appellant do pay the Respondent's costs of and incidental to each of its appeals, such costs to be the subject of detailed assessment if not agreed.
4. The Appellant do pay the Respondent the sum of £35,000 by way of an interim payment on account of the Respondent's costs ordered by paragraph 3 above.
5. Current stay of enforcement of the orders under appeal be lifted.
6. Permission to appeal to Supreme Court refused.
Dated 16th July 2015