The defendant repaired some of these, but in September the claimant tried to reject the vehicle and asked for his money back. The defendant refused, so in March the claimant issued proceedings claiming damages. In the course of disclosure, he discovered that the vehicle was not in fact new at the time of purchase, so he amended his claim to plead misrepresentation and claim rescission.
The court found that the claimant had relied upon the misrepresentation and would not have bought the car if he had been aware of its age and history. However, the District Judge held that he could not order rescission because he could not put the parties back in their original position.
The Court of Appeal dismissed the appeal, finding that: i restitution was not impossible; and ii the delay that had taken place was not a bar to rescission.
The Court of Appeal disagreed, finding that neither depreciation nor intermittent enjoyment should be regarded as reasons for saying restitution is impossible. On the facts in this case, the court found that the absence of evidence about depreciation or the value of the use of the car should not operate to the disadvantage of the claimant, who should never have been put in the position of having a troublesome old car rather than a brand new one.
The Court of Appeal found that lapse of time on its own could not be a bar to rescission in this case. The claimant had only discovered the misrepresentation during the course of disclosure in the action. The Court of Appeal referred to Leaf v International Galleries [] 2 KB 86 in which rescission was not permitted on the basis that a defendant to a misrepresentation claim should not be in a worse position than someone who had made the misrepresentation a term of the contract.
In the present case, the point did not arise on the pleadings as to whether the claimant was entitled to reject the car. However, the Court of Appeal noted that Leaf was decided well before the Misrepresentation Act was passed. This award represented the difference between the value of the car had it in fact been brand new and the actual value of the car at the time of purchase, together with GBP in damages for the inconvenience the defects caused to Mr Salt.
On appeal, His Honour Judge Charles Harris QC overturned the County Court decision holding that rescission was possible and ordering Stratstone to repay the purchase price in return for the car.
Stratstone appealed to the Court of Appeal. Damages under s2 2 of the Act. As a preliminary matter, the Court of Appeal held that a court will only have the power under s2 2 to award damages in lieu of rescission as a remedy for innocent misrepresentation if rescission itself is also available as a remedy ie it is possible to put the parties back into their pre-contractual positions.
Previously there had been no Court of Appeal authority on this point. The Court of Appeal held that it was possible to restore the parties to their pre-contractual positions because:. Stratstone could be compensated for the depreciation in the value of the car.
The onus was on Stratstone to assert and prove its entitlement to compensation, which it did not do. Delivering the lead judgment, Lord Justice Longmore citing, with approval, the decision in British and Commonwealth Holdings v Quadrex [] CLC , noted that rescission is the normal remedy for misrepresentation and should be awarded if possible, particularly in circumstances in which a defendant makes no attempt to prove it had reasonable grounds to believe its representation was true.
Lapse of time: what is reasonable? Mr Justice Roth commented that a lapse of time will only operate as a bar to rescission in circumstances where the lapse of time is reasonable such that it would be inequitable in all the circumstances to grant rescission.
Determination of what is reasonable will require close attention to the facts of the case. Comment : This case clarifies that, in a claim for innocent as opposed to fraudulent or negligent misrepresentation, damages under s2 2 of the Act may only be awarded, as an alternative remedy to rescission, where rescission itself is also available ie where it is possible to put the parties back into their pre-contractual positions. There has been a divergence of views on this in lower courts.
The case confirms that rescission is the normal remedy for misrepresentation and that, where possible, a court should award this remedy rather than damages. In deciding whether to award damages in lieu of rescission under s2 2 , the court will favour the remedy that is most equitable, exercising a broad discretion which includes considering the likely effect on both parties of permitting the contract to continue.
Rescission can perhaps most simply be described as the cancellation of the original contract. It renders the entire contract invalid and therefore unenforceable by law. There is no partial rescission. Contract rescission may be mutual, in which case both parties can peacefully terminate the underlying contract and move on without conflict over damages and other such issues.
In many cases, however, rescission is brought forth unilaterally. Generally speaking, rescission will not be allowed in disputes where some of the duties under contract have already been discharged and significant losses have been sustained — or will be sustained, if the contract were to be rescinded. If a third-party has received a benefit as a result of the contract, for example, then rescission would not be a just remedy.
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