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Friday, 17 July 2015

Rescission or damages in a misrep case?

Salt v Stratstone Specialist Ltd (t/a Stratstone Cadillac Newcastle) [2015] EWCA Civ 745 (16 July 2015) concerned a car sold as "brand new" when in fact it had been manufactured a couple of years earlier, and in the interim although it had not been registered had suffered significant accident damage, which had been repaired. Suffice to say that the claimant said that if he had been aware of the history he would not have bought it.

The car suffered from a classic congeries of small defects, and a year after buying it the owner purported to reject it, later issuing proceedings and taking it off the road. In May 2011 - a couple of years after proceedings were issued, and nearly 4 years after the purchase - Stratstone disclosed documents that revealed that the car had not been new when sold, and the claimant amended his claim accordingly. The district judge decided that he could not order rescission under the Misrepresentation Act 1967, because the parties could not be restored to their original position: there had been too much use of the car, and too much time had elapsed. He also took into account that the car could not be restored to unregistered condition, which seems a rather unrealistic condition to apply: it would surely make rescission unavailable in any new car case. He awarded damages, based on the value of the car at the time of the sale and the sale price. HHJ Charles Harris, to whom the first appeal went, differed from this assessment and ordered rescission. (He also awarded the claimant his costs, later amending the award so costs were to be on a more generous indemnity basis because the claimant had offered to accept £4000 in settlement.)

On appeal to the Court of Appeal, it was noted that the question of whether section 2(1) of the 1967 Act was available at all if there were a bar to rescission was "open"  at the CA level - there were authorities both ways. The court concluded that the correct view was that if rescission were not available, damages could not be awarded because they were in lieu of rescission: and in lieu of nothing must mean nothing (my words, not the court's, but you see what I mean). The Court of Appeal held that restitution was indeed possible and therefore rescission was the appropriate remedy, that damages could not adequately compensate the claimant, and that the delay was not a problem especially as it was only on disclosure that the nature of the claim became clear. All of which seems to make good sense, unfortunately for Stratstone whose employee had made such an optimistic claim about the car in the first place. It points to a need for training and caution more than anything else.

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