• In the case of Howard Marine and Dredging Co v A. Ogden and Sons [1978] Q.B. 574, it was held that in negotiations leading to a contract, the Misrepresentation Act 1967 imposes an absolute obligation not to state facts which the person making a representation cannot prove he had reasonable grounds to believe.

Facts of the Case

  • D wanted to hire barges to dump excavated clay at sea. One barge would be loaded while the other was dumping.
  • In a letter dated 10th April 1974, C offered to let barges to D and stated their capacity at 850 cubic metres. This figure was taken from the Lloyd’s Register.
  • After negotiations were completed, it became apparent that the figure in Lloyd’s Register was incorrect and the barge’s capacity was much lower.
  • The correct capacity was in C’s shipping documents, but C’s representative had not examined these during negotiations.
  • Due to difficulties using the barges, D paid part of the hire costs but refused to pay the full negotiated amount. C withdrew the barges.
  • On 7th July 1975, C issued a writ for outstanding hire of the barges. D counterclaimed as the barges were defective and C had misrepresented their capacity, severely delaying their excavations.
  • The judge dismissed the counterclaim and found for C, leading D to appeal.

Issues

  • Had C discharged the burden of proof by demonstrating reasonable grounds for believing the figures were correct?

Held by the Court of Appeal (Civil Division)

  • Finding for D, that C had not proven that their representative had reasonable grounds for believing, and did believe, that the figures stated in the letter were true. There was no reason why C had preferred Lloyd’s Register when they had full access to the shipping documents. C was liable for negligent misrepresentation.

Bridge L.J.

  • The Misrepresentation Act 1967 section 2(1) provides that where a person enters into a contract after a misrepresentation was made by the other party and he suffers loss, the person making the misrepresentation will be liable even if the misrepresentation was not made fraudulently.
  • The exception is where the person making the misrepresentation proves that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true.
  • Liability under the 1967 Act is based on this absolute obligation during negotiations leading up to a contract. It is not dependent on a duty of care.
  • It is tempting to conclude that the figure C’s representative had seen in Lloyd’s Register afforded reasonable ground for his belief. But that would over-simplify the matter.
  • He had seen both the inaccurate figure in Lloyd’s Register and the accurate figure in the ship’s documents but relied on the former. This required explanation since both expert evidence and common sense would tell you that the ship’s documents would be more reliable.
  • “I am fully alive to the dangers of trial by transcript, and it is to be assumed that C’s representative was perfectly honest throughout. But the question remains whether his evidence, however benevolently viewed, is sufficient to show that he had an objectively reasonable ground to disregard the figure in the ship’s documents and to prefer the Lloyd’s Register figure. I think it is not. The fact that he was more interested in cubic capacity could not justify reliance on one figure of deadweight capacity in preference to another. The fact that the deadweight figure in the ship’s documents was a freshwater figure was of no significance since, as he knew, the difference between freshwater and seawater deadweight capacity was minimal. Accordingly, I conclude that C failed to prove that their representative had reasonable grounds to believe the truth of his misrepresentation to D” [598E].

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