legal advice on property - Misrepresentation

Porkies and General Misrepresentation

In Blog, News by Jar Half Full

Misrepresentation is a civil wrong which occurs when one party makes a statement of fact which is untrue, and that statement persuades another party to enter into a contract they regret. It need not be written down, though it is harder to prove that the statement was made when it wasn’t written down. Obvious sales talk which is not intended to be taken seriously and does not amount to a statement off fact does not count, nor do statements of opinion, though it can sometimes be inferred from an opinion that it is a representation that the statement-maker believes that what they are saying is true (which can be a misrepresentation if it transpires later that they did not do so at the time).

There are various levels of misrepresentation depending on the level of culpability that attaches to the incorrect statement at the time the person said it. The most serious kind is fraudulent representation, where the statement-maker did not believe the statement to be true at the time they said it.

Misrepresentation which is this serious may well be a criminal offence under the Fraud Act 2006 as well.

Then there is misrepresentation under the Misrepresentation Act 1967, where the statement-maker may or may not believe the statement to be true at the time they made it but they realise at some point between making the statement and the person entering into a contract as a result of relying on the truth of the statement that it is not true, yet they do not pass on this correction to the person who heard the first statement.

The next most serious is negligent misstatement, where the statement maker owed a duty off care to try and get it right and got it wrong (probably without realising it), but in circumstances where they would not have got it wrong if they had made reasonable (though not necessarily exhaustive) enquiries in order to try and get it right.

The least culpable kind is innocent misrepresentation, where the statement is false, but the statement maker did not know it was false and was not careless about whether their statement was correct or not. Though there are circumstances in which even innocent misrepresentation is enough to allow the person who relied on the contract to be allowed to cancel the contract as if it had never happened.

From this you can see that it is important to establish what the statement-maker knew at the time they made the statement, and at the time the person relying on the statement signed on the dotted line.

An important factor in being able to cancel a contract for misrepresentation is cancelling the contract quickly once you know there is a problem. You may lose the right to cancel through the passage of time since knowing of the problem, or if cancelling the contract and trying to put the parties back where they started is complicated by later contracts with third parties.

However even if it is no longer possible to cancel the contract it may still be possible to claim compensation, reflecting the losses you have suffered as a result of entering into a bad contract that you would never have entered into were it not for the misrepresentation.

Another important factor in many misrepresentation cases involving timeshare is that the later contract may seek to exclude liability for misrepresentation in some way, through a disclaimer or a clause excluding liability or a clause saying that the terms of the contract form the entire agreement and any pre-contract representations are neither here nor there. Do not assume that these clauses are binding – sometimes they are unenforceable as a matter of EU (or UK) consumer protection law.

The Law; Fraud by False Representation

(Section 2)

It is an offence to commit fraud by false representation. The false representation must be: – made dishonestly; with the intention of making a gain or causing loss or risk of loss to another. The gain or loss does not actually have to take place.

A representation is false if: –

(a)  It is untrue or misleading; and

(b)  The person making it knows that it is, or might be, untrue or misleading.

“Representation” means any representation as to fact or law, including a representation as to the state of mind of: –

(a)  The person making the representation, or

(b)  Any other person.

A representation may be express or implied. It can be stated in words or communicated by conduct. There is no limitation to the way in which a representation must be expressed. It may be written or spoken or posted on a website.

For this section of the Act a representation may be regarded as made if it (or anything Implying it) is submitted in any form to any system or device designed to receive, convey or respond to communications (with or without human intervention).

The offence is complete as soon as the false representation is made, provided that it is made with a dishonest intent.

• A person claiming disability benefit intentionally misrepresents their pre-disability earnings in order to receive the maximum benefit.

• A person claiming disability benefit intentionally misrepresents the limitations imposed by their illness or accident in order to convince the insurer that they meet the definition for a valid claim.

FRAUD BY FAILING TO DISCLOSE INFORMATION (Section 3)

A person is in breach of this section if he: –

(a) Dishonestly fails to disclose to another person information which he is under a legal duty to disclose, and

(B)  intends, by failing to disclose the information to: –

i) make a gain for himself or another, or

ii) cause loss to another or to expose another to a risk of loss.

There is no requirement that the failure to disclose information must relate to “material” or “relevant” information. If a person discloses only part of the information the offence would be complete. It is no defence that the person was ignorant of the existence of the duty to disclose, neither is it a defence in itself to claim inadvertence or incompetence.

However, the prosecutor must be able to demonstrate dishonesty.

The legal duty to disclose information can arise as a result of a contract between two parties or because of the existence of a particular type of professional relationship.

The expression “legal duty” has three elements: –

i) Whether the facts as alleged are capable of creating a legal duty is a matter for the judge

ii) Whether the relationship that would create any legal duty exists on the facts alleged is a matter for the jury directed by the judge

iii) If the matter is not in issue the judge may direct the jury that a legal duty

FRAUD BY ABUSE OF POSITION

A person is in breach of this section if they: –

• occupy a position, in which they are expected to safeguard, or not act against, the financial interests of another person,

• dishonestly abuses that position, or

• intends, by means of the abuse of that position: –

i) to make a gain for themselves or another, or

ii) to cause loss to another or to expose another to a risk of loss.

A person may be regarded as having abused his position even though his conduct consisted of an omission rather than an act.

“GAIN” AND “LOSS”

• Extend only to gain or loss in money or other property;

• Include any such gain or loss whether temporary or permanent;

And “property” means any property whether real or personal (including things in action and other intangible property).

“Gain” includes a gain by keeping what one has, as well as a gain by getting what one does not have.

“Loss” includes a loss by not getting what one might get, as well as a loss by parting with what one has.