Royscot Trust Ltd v Rogerson
Encyclopedia
Royscot Trust Ltd v Rogerson [1991] EWCA Civ 12 is an English contract law
English contract law
English contract law is a body of law regulating contracts in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries across the Commonwealth , and the United States...

 case, concerning the Misrepresentation Act 1967
Misrepresentation Act 1967
Misrepresentation Act 1967 is an Act of the Parliament of the United Kingdom, which regulates English contract law and unjust enrichment, so far as relevant for misrepresentations.-Section 1:-Section 2:...

 and the extent of damages available under s 2(1) for negligent misrepresentation. It decided that under the Act, the appropriate measure of damages was the same as that for common law fraud, or damages for all losses flowing from a misrepresentation, even if unforeseeable.

Facts

Andrew Rogerson wanted to get a second hand Honda Prelude
Honda Prelude
The Honda Prelude was a sports coupe produced by Japanese automaker Honda from 1978 until 2001. It replaced the Honda S800, a front-engined, front wheel drive sports car...

 on hire purchase
Hire purchase
Hire purchase is the legal term for a contract, in this persons usually agree to pay for goods in parts or a percentage at a time. It was developed in the United Kingdom and can now be found in China, Japan, Malaysia, India, South Africa, Australia, Jamaica and New Zealand. It is also called...

. He went to see the car dealer, Maidenhead
Maidenhead
Maidenhead is a town and unparished area within the Royal Borough of Windsor and Maidenhead, in Berkshire, England. It lies on the River Thames and is situated west of Charing Cross in London.-History:...

 Honda Centre Ltd. They agreed to sell Mr Rogerson a car for £7600. Mr Rogerson paid a £1200 deposit. To finance the rest, Mr Rogerson got the help of a finance company called Royscot Trust Ltd. On Mr Rogerson's behalf, Maidenhead did the application forms. But it falsely stated (i.e. misrepresented) that the cost of the car was £8000 and the deposit being paid was £1600. Royscot approved the loan. Had accurate figures been stated, Royscot would not have done this as its policy was only to lend money for hire purchase if 20% of the total cost was paid in the deposit (1200/7600 = 15.7%).

Mr Rogerson started to pay off his instalments, but subsequently ran into difficulties with money. In August 1987 he sold the car off, dishonestly, as he knew it was not allowed under the terms of the hire purchase agreement. He informed the finance company of this in August 1988, and stopped paying instalments in September 1988, with £3,625·24 left to pay.

In order to recover its losses, Royscot sued the car dealer, Maidenhead Honda Centre Ltd, alleging that the company's reliance upon the garage's innocent misrepresentation (fraud was not mentioned) induced it to enter into the hire purchase contract. It argued that, had the car dealer not given the wrong figures, it would never have entered the credit agreement, and therefore the susequent loss was the car dealer's fault. The car dealer countered that the real cause of Royscot's loss was Mr Rogerson's dishonest sale of the car, because if he had not sold it, they would be entitled to repossession and discharge of their debt that way. The car dealer argued that Mr Rogerson's independent wrongful act broke the chain of causation between its misrepresentation and Royscot's loss.

The court had to consider whether under the Misrepresentation Act 1967
Misrepresentation Act 1967
Misrepresentation Act 1967 is an Act of the Parliament of the United Kingdom, which regulates English contract law and unjust enrichment, so far as relevant for misrepresentations.-Section 1:-Section 2:...

, s.2(1), a misrepresentee is liable for all consequences of a false statement (as in a common law action for fraud), or if Mr Rogerson's independent act broke the necessary chain of causation (as in a common law action for negligence).

Judgment

Balcombe LJ and Ralph Gibson LJ held that for innocent misrepresentation under s.2(1), the correct measure of damages was tortious measure, and the same as that for the tort of deceit
Tort of deceit
The tort of deceit, also known as "fraud", dates in its modern development from Pasley v. Freeman. Here the defendant said that a third party was creditworthy to the claimant, knowing he was broke. The claimant loaned the third party money and lost it...

. The car dealer was liable for all the consequences of his misrepresentation, and therefore had to pay off the debts owed to Royscot Trust Ltd. In any case, Mr Rogerson's wrongful sale of the car was foreseeable and not a break in the chain of causation. Balcombe LJ read the key passage.
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