representations

representations

Statements that parties make to each other about the subject matter of the contract - distinct from negotiations.

NZ approach to misrepresentations

• Treat a misrepresentation as a term of the contract for most purposes 

• Provide contract law remedies (e.g. damages s 35 CCLA and cancellation for serious misrepresentations (s 37 CCLA); or s 34 remedy provided in contract

• Bar proceedings for deceit or negligence (s 35(1)(b) CCLA)

See CCLA s 35, 34, and 37

What is a misrepresentation?

A false or erroneous statement of past or present fact (Savill v NZI Finance - per Ladstone)

Suggested approach to misrepresentation

1. What does the statement mean (Magee v Mason)

2. Is the statement prima facie a statement of past or present fact; 

   • If so is it true or false;

   • If not - consider whether the statement contains implied statements of past or present fact

     1. If it does consider whether those implied statements of past or present fact are true or false

Meaning and truth

Exercise of interpretation - plain meaning and meaning that a person with the background knows and understands it to mean in the context

Predictions - can they be misrepresentations

Default rule: Predictions are statements about the future - not about past or present fact so prima facie aren’t misrepresentations; 

But: predictions can inherently imply present facts; so in cases where future predictions can only logically follow from certain present facts 

• If a prediction is implausible on present facts then there is likely a misrepresentation implied (NZ Motor Bodies v Emslie)

example of predictions which constituted misrepresentations (3)

NZ Motor Bodies v Emslie

• Profit forecast painted a rosy picture however the business was technically insolvent

Ware v Johnson

• “The kiwifruit vines will bear fruit in 2 years” (future) 

• Sprayed with a pesticide, the vines were in the process of dying

• Not possible for the vines to produce fruit, as they were dead

• In order for that prediction to come true, the vines needed to be alive

Esso Petroleum Co Ltd v Mardon

• Current owners of petrol station were aware of a change in council planning which would likely lead to a reduction in throughput

• Owners made a prediction in the leadup to the contract that was based on current throughput

Opinions - can they be misrepresentations

General rule: opinions aren’t statements of fact thus prima facie aren’t misrepresentations - merely expressing a false opinion isn’t a misrepresentation.

• But: opinions can imply certain facts or be held out as fact (implied representations can sit behind express statements of opinion)

  • People can have opinions about facts; whether or not a person holds an opinion is a matter of fact; and Opinions can be based on facts
    
    

• So: if opinions are held out as fact or imply the truth of certain facts, they can be misrepresentations
  -  if past and present facts would allow a reasonable person to hold the opinion = opinion 

• (only a wildly outrageous opinion could suffice as a misrepresentation?

opinions as misrepresentations - examples (2)

Smith v Land and House Property Corp

• Statement that the tenant was “the most desirable tenant”, yet the tenant was in a poor financial position and had not been consistently paying rent

• Was a misrepresentation

Bisset v Wilkinson

• Claim that the farm held a certain number of sheep which turned out to be untrue. The more expertise they have the more likely they will be treated as evolving statement of fact rather than a mere opinion

• Was merely reckons as the seller had never farmed sheep. Not a misrepresentation

Puffery - can it be a misrepresentation?

Statements of puffer are not supposed to be taken seriously as statements of fact (even if  written as facts) But: some puffery can be actionable if it could reasonably be interpreted as a statement of fact (Carlill v Carbolic Smokeball)  Potentially if they have actioned something promised.

Silence - can it be a misrepresentation?

• By definition not even a statement thus prima facie not a misrepresentation; 

• BUT; a half-truth is also a half-lie. 

• So: if a party omits important information or context while saying something, that can be a misrepresentation - but only if they actually knew the information omitted at the time

General principles; (Ladstone Holdings Ltd v Leonora Holdings Ltd)

• No general duty to disclose 

• Mere silence is not a misrepresentation 

• Silence can distort a positive representation

examples of silence as a misrepresentations

Examples; 

Wakeman v Jackson; 

• Real Estate agent said that the nearest competition is half a mile away (this was true at the time)

• Agent was aware competitor was moving in next door but failed to disclose the additional information

• A reasonable listener would assume no competitors were going to be opening up soon; 

• Was a misrepresentation

Thomson v Vincent

• Sold a block of motels, stating that the block could be run as 24 units

• Planning consent could only run with 12 units making the business financial unsustainable

• Implied that the motel could operate with 24 rooms.

• The failure to disclose the information amounted to a misrepresentation
  
  

CCLA - Remedies for actionable misrepresentation

• Cancellation (s 37 CCLA: can cancel if misrepresentation essential see cancellation notes)
  
  

• Damages (s 35(1) CCLA: In the same manner and to the same extent as if the representation were a term of the contract)

• Parties’ terms dealing with representations; 

  • Section 34 - remedy provided in contract

  • Ss 50-51

Common requirements for cancellation and damages;

• A and B are parties to the contract

• Misrepresentation 

• Made by or on behalf of B

• To A

• Inducement 

Note: additional requirements for cancellation - see those notes.

Inducement for purposes of s 35 and s 37

3 different inquiries;  Causation   representee focused; did the representation cause them to enter into the contract? Purpose Representor-focused: did the representor intend to influence - subjectively [actual intent] or objectively [enough that a reasonable person would think this statement was made to make someone enter the contract].  Reasonableness - Representee focused - was it reasonable to rely on the representation  Will look at the Representees knowledge Where a clear and unequivocal representation is made it will be reasonable to take the representation at face value (Magee)

S 34 - contract provided remedies and limitation/no reliance clauses

• S 35-49 have effect subject to the contracts provision

• Provisions limiting court inquiry

  • Entire agreement clause 

    • Sets out that the document comprises the entire agreement between the parties and supersedes all previous discussions and representations

    • Idea is that the party is trying to cut off misrepresentation liability

  • ‘No reliance’ clause

    • acknowledging /establishing that the tenant has not entered into the agreement on reliance of any statement or representation made by the landlord 

    • Rationale: even if a misrepresentation is established - they agreed they weren’t induced into the contract so might not be able to get damages.

CCLA TEST - INDUCEMENT WITH A ‘NO RELIANCE’ OR ENTIRE AGREEMENT CLAUSE

1. Starting presumption: No reliance clause has effect; no inducement (s 34)
   
   

2. Is it fair and reasonable for the clause to be conclusive, with regard to: (s 50)
   
   

   1. Subject matter and value of transaction

   2. Respective bargaining strengths of parties

   3. Parties’ legal representation
      
      

S 51 -court is not prevented by any provision from inquiring into and determining the question of authority - where 3rd party  makes the statement - courts will see if the person had actual or ostensible authority of a party to make or give it. 

3. If not, apply the inducement test:
   
   

   1. Causation?

   2. Purpose?

   3. Reasonable reliance?

Magee v Mason

2009  - magees purchase the house  2011 - dinner party 28/10 - leakiness came up at the dinner party  29/10 - tour  - asked about leakiness again - told ‘‘absolutely not we’ve never had any issues with the property’  Open home - real estate agent said it was a quality build Further visits  20/12 - contract 2013 - masons encounter problems 2014 - confirmation that the house had structural defects which made the home leaky

Held no misrepresentation.  Look at the meaning of the statements first  Depending on the interpretation the statement may or may not be a misrepresentation.  Need to pay close attention to context Takes what might be a factual claim and converts it to more of a representation of the vendors knowledge. Purchaser placed reliance on the assumption that she'd know after living in it for 2 year A reasonable listener would understand it’s the statement to mean that to the best of my knowledge it is not a leaky home because we haven't had issues.

Ladstone Holdings Ltd v Leonora Holdings Ltd

Ladstone bought land for development Land had a privately owned pipe under it which they weren't aware of Pipe hindered development Sued vendor for misrepresentation Issue: Whether there was a misrepresentation? Court held that if D made a false statement without realising it was false, it was an innocent misrepresentation Held that if D made a true statement that conveyed a false impression because of a failure to add information, there is only a misrepresentation if D knows that information

If a person makes a false statement without realising it was false, it was an innocent misrepresentation If a person makes a true statement that conveys a false impression because of a failure to add some information, there is only a misrepresentation if that person knows of the additional information.   Silence on an unknown matter (wholly unconscious) cannot properly be regarded as misleading and deceptive conduct under the FTA