The Gazette 1979

GAZETTE

JULY-AUGUST

1979

has been a total failure of consideration. On the facts of Lecky v. Walter the second ground was held inapplic- able. The plaintiff had bargained for bonds and had got bonds, albeit worthless bonds! In England the 1967 Act Section 1(b) gave effect to the Law Reform Committee's denouncement of the rule by providing that no matter what the subject matter of the contract be, the fact that a contract has been executed should not impede the right to rescind. The provisions of Section41(b) obviously attempts also to sweep away the rule but it is clear that the Irish courts are still in the majority of cases saddled with the rule in Seddons Case. This is the result of an unfortunate piece of drafting, for Section 41(b) only applies to contracts for the sale of goods, hire purchase agreements and the supply of ser- vices: see Section 40. Most of the cases which arise under this rule will be outside those three situations. A contract for shares, shares being a chose in action, is not a contract for the sale of goods so the Act leaves Lecky v. Walter unimpaired. On the facts of Wilde v. Gibson, the contract there being a contract for the purchase of land would also escape Section 41(b). Damages for an innocent misrepresentation The law student confronted with the problem of coming to terms with the law relating to mis- representation finds that he is invited to accept the proposition that while the victim of an innocent mis- representation may be entitled to rescind a contract in equity, he cannot recover damages unless the mis- representation is either a contractual term or actionable in tort, either in deceit (see Fen ton v. Schofield 100 ILTR 69) or under Hedley Byrne (approved and discussed by Kenny J. in Bank of Ireland v. Smith [1966] I.R. The non-fraudulent/non-contractual representation, or bare representation as it is traditionally described is not to give rise to a remedy in damages because of the decision of the House of Lords in Heilbut Symons & Co. v. Buckleton [1913] AC. 30 in which an oral representation inducing a contract was held not to sound in damages principally on the ground that innocent misrepresentations are not intended to have contractual effect: See Treitel, The Law of Contract 4th Edition at 97. This assumption has been challenged by Denning M.R. as being "out of date" and Kenny J. has stated that "the modern cases show a wel- come tendency to treat a representation made in connection with a sale as being a warranty unless the person who made it can show that he was innocent of fault in connection with it" B. of I v. Smith (supra) at p. 659. In addition the Hedley Byrne development in tort further indicates that the tactic of arguing a collateral contract in order to avoid Heilbut Symons & Co. has become less important. The English 1967 Act section 2(1) removed all doubts and uncertainties and considerably reduced the chances of a court finding that a misrepresentation was not to sound in damages. This section has been reproduced in section 42( 1) of the Sale of Goods and Supply of Services Act Bill which provides: "Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the representation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwith- standing that the misrepresentation was not made

fraudulently, unless that he proves that he had reason- able ground to believe and did believe up to the time the contract was made that the facts represented were true/' [author's italics]. Because the Irish legislation is so closely linked to the English 1967 Act it may be instructive to examine how this section has been viewed by the English courts. The present writer intends to do so by examining three aspects of the section. (1) The scope of the section The Misrepresentation Act 1967 has been found most useful by the English judiciary in a few residual cases where a remedy in damages was not previously available. For example, in Gosling v. Anderson, The Times, February 6th 1972, the Court of Appeal awarded damages to the purchaser of a flat who had been informed wrongly by the defendant's agent that planning permission had been granted to permit garages for each of the flats to be built notwithstanding the fact that the agent honestly believed this to be so. However, the most important effect the 1967 Act has had in England has been to virtually eliminate the rule in Bain v. Fothergill (\ SI A) L.R. 7 H.L. 158 which, it may be recalled, limits the recoverability of damages where, without fraud, a vendor cannot make out title to land, to the expense incurred, if any, in searching title. This rule, whilst understandable in the context of 18th and 19th century conveyancing practice has un- fortunately been accepted as good law in Ireland although modern judges attempt to distinguish the rule as in- applicable whenever this is possible: see an interesting note by O'Driscoll in Volume X (1975) Irish Jurist 203. The 1967 Act has been held by Graham J. in Watts v. Spence [1975] 2 All E.R. 528 to limit Bain v. Fothergill to cases where there was no misrepresentation, fraudulent or innocent. Unfortunately the rule in Bain v. Fothergill is un- affected by the 1978 Irish Bill despite the fact that Section 42(1) and Section 2(1) of the 1967 English Act are identical. Again, the difficulty stems from Section 40 which limits "contract" to mean contracts for the sale of goods, hire purchase agreements and supply of services. A contract for the sale of land cannot be either of these. The fact that very real difficulties may arise in this con- text turns upon the likelihood of an increase in the number of actions in which a vendor has not been able to transfer title and is sued by a disappointed purchaser. The Family Home Protection Act 1976 Section 3 has recently been held by the Supreme Court in Somers v. Weir to render a purported contract by a husband to sell the matrimonial home void even if at the time of sale the wife is not in occupation and the marriage has broken down. The purchaser was unable to show she was a bona fide pur- chaser without notice. Although the vendor was not sued in that case any future action for damages brought against the vendor of a matrimonial home will meet the full force of Bain v. Fothergill unless deceit or fraud is shown which may be difficult or if Section 3 is held to be an impediment to making good title which because of its statutory origin is outside Bain v. Fothergill: see Megarry J's judgement in Wroth v. Tyler [ 1973] 1 All E.R. 897. It is suggested that the best solution would be to amend the proposed section 40 so as to bring Bain v. Fothergill within the scope of Section 42(1). (2) The Measure of Damages under section 42(1) It may be important to determine whether the cause of action is founded in contract as against tort because the

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