Aidan O’Brien successfully resists an appeal following dismissal of a credit hire claim, on the basis of fraudulent misrepresentation – Kadir v Thompson, 25 August 2016, Central London County Court, HHJ Luba QC

Aidan O’Brien was recently instructed by the Defendant and subsequent Respondent to an appeal, in a claim relating to credit hire charges in the sum of £21,653.

At first instance, Aidan successfully argued that the Accident Exchange credit hire agreement was voidable on the basis of fraudulent misrepresentation and that the Claimant had elected to void the same during the hearing. It followed that the entirety of the credit hire charges were found to be unenforceable against the Defendant.

During cross-examination of the Claimant, Aidan elicited evidence that demonstrated that prior to signing the credit hire agreement, employees of Accident Exchange had misled the Claimant into believing that he would have no personal liability for the hire charges, under any circumstances. The Claimant further confirmed that he relied upon those assurances and would not have signed the hire agreement if he had known the true position. The Claimant made clear that he did not consider himself bound by the hire agreement.

Aidan submitted that such assurances amounted to fraudulent misrepresentations, given that Accident Exchange’s employees had (at a minimum) been reckless as to the truth of the same. The hire agreement was therefore voidable at the Claimant’s election. Aidan further argued that the effect of the Claimant’s evidence was that he had chosen to void the agreement and therefore the charges were not enforceable against the Defendant.

Counsel for the Claimant attempted to argue that an ‘entire agreement clause’, within the terms & conditions of the hire agreement, stipulating that the Claimant could not rely upon any representations made by Accident Exchange, precluded the Defendant from establishing voidability on the basis of misrepresentation. Following argument, the District Judge accepted Aidan’s contention that the entire agreement clause had no effect by dint of the Unfair Terms in Consumer Contracts Regulations 1999.

The District Judge concluded that:

 

‘… I find that there was a fraudulent misrepresentation which induced the claimant to enter into the contract. The contract is therefore voidable at the claimant’s election. The first the claimant knew of his liability to Accident Exchange was at the hearing today. The claimant made it very clear to the court that he does not accept any personal liability for the charges of Accident Exchange because he was assured by them that he would not have to pay those charges. I find that the claim is voidable due to the misrepresentation and the claimant will seek to void the contract to avoid any contractual liability to Accident Exchange. Accident Exchange cannot, therefore, recover the costs of the two hire agreements from the defendant as Accident Exchange will not succeed in enforcing the contracts as against the claimant due to misrepresentations.’

 

The Appeal before HHJ Luba QC

In April 2016, HHJ Baucher QC gave the Claimant permission to appeal the District Judge’s decision. On 25 August 2016, the appeal came before HHJ Luba QC, sitting at the Central London County Court.

 

The Claimant sought to appeal on a number of grounds, including the District Judge’s determination as to the enforceability of the credit hire agreement.

 

The Claimant argued that the District Judge’s decision was wrong given that the Defendant had failed to (a) explicitly plead misrepresentation, and (b) that any such misrepresentation (which was denied) would only leave the contract voidable (at the election of the Claimant) and not void as the learned Judge found.

 

Following submissions, HHJ Luba QC determined that the failure to explicitly plead ‘misrepresentation’ was ‘… a thoroughly bad point’ given that the general ‘enforceability’ of the hire agreement had been raised within the Defence. The term ‘enforceability’ was therefore wide enough to permit enquiry via cross-examination as to whether misrepresentations had been made.

 

Counsel for the Claimant further argued that the District Judge was wrong to find that the contract had in fact been avoided during the hearing below given her observation that the Claimant ‘will seek to void’ the agreement (i.e. in the future). HHJ Luba noted that the District Judge’s comments needed to be read in conjunction with the earlier comment that ‘…the claimant made it very clear to the court that he does not accept any personal liability for the charges…’ and determined that the learned Judge had found that the Claimant was treating the agreement as void (i.e. he had avoided it).

 

Analysis

 

The legal principles underpinning misrepresentation are trite:

1. The burden of establishing that a misrepresentation has been made rests on the party asserting it.
2. Pre-contractual statements made during negotiations leading up to a contract may qualify as ‘representations.’

1. Such representations may be statements of fact or law.
2. A misrepresentation is a false statement of fact or law.
3. A misrepresentation becomes actionable if it is an unambiguous and false statement of fact or law addressed to a party who is misled by it and is a material representation, which induces the contract and causes loss.
4. The consequence of an actionable misrepresentation is to make a contract voidable rather than to render it void.

 

A ‘fraudulent misrepresentation’ arises where it is shown that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. The motive of the person guilty of the misrepresentation is immaterial.

 

HHJ Luba’s decision provides a salutary warning to Claimants and credit hire organizations that the oft-pleaded issue of ‘enforceability’ is wide enough to encompass consideration of whether misrepresentations have rendered a credit hire agreement voidable. In such circumstances, if a Claimant then confirms that they do not consider themselves to be bound by the charges imposed under the agreement the totality of those charges may be found to be unenforceable.

 

Aidan O’Brien is a member of the Farrar’s Building Credit Hire Team and accepts instructions from both Claimants and Defendants. Aidan frequently delivers training, seminars and workshops upon request. Any such request should be made to the Farrar’s Building Clerking Team.

 

The judgment of Kadir v Thompson can be found on:

Lawtel

https://www.lawtel.com/UK/Searches/3942/AC0154473

Westlaw

https://login.westlaw.co.uk/maf/wluk/app/document?&srguid=i0ad832f10000015d1745dc4fb6869c22&docguid=I53A6A32030AB11E78222D9B52999FA70&hitguid=I53A6A32030AB11E78222D9B52999FA70&rank=1&spos=1&epos=1&td=1&crumb-action=append&context=15&resolvein=true

 

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Author: Aidan O'Brien Farrars (chambers@farrarsbuilding.co.uk)

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