Royscot Trust Ltd v Rogerson [1991] 3 WLR 57
Facts
A car dealer supplied inaccurate information about the price and deposit in a proposed hire-purchase transaction. Royscot, the finance company, required a minimum deposit proportion before it would finance a purchase. The figures represented the transaction as meeting that policy when it did not. Royscot entered the arrangement in reliance on the information. The customer later disposed of the car dishonestly and defaulted, leaving the finance company with a loss. Royscot pursued the dealer under section 2(1) of the Misrepresentation Act 1967, raising questions about the measure of damages and the effect of the customer’s conduct.
Legal Issue
Are damages under section 2(1) assessed by the deceit measure, and did the customer’s dishonest disposal of the car prevent recovery of the finance company’s resulting loss?
Held
The Court of Appeal applied the measure of damages used in deceit to liability under section 2(1). It relied on the provision’s direction to assess liability as if the representation had been fraudulent, even though fraud itself was not the basis of the statutory finding. The claimant could therefore recover loss directly flowing from entering the transaction, rather than being confined to loss satisfying the ordinary negligence test of reasonable foreseeability. Causation still mattered. On the facts, the customer’s dishonest sale did not break the connection between the dealer’s misrepresentation and the finance company’s loss. The court also considered that such conduct was foreseeable in the transaction. The reasoning did not grant damages for every non-fraudulent statement or for unrelated losses.
⭐ Legal Principle
Royscot applies the deceit measure of damages to liability under section 2(1) of the Misrepresentation Act 1967. Recoverable loss must directly flow from the induced transaction, but is not limited by ordinary negligence foreseeability. Statutory liability and causal connection must still be established.
Significance
Royscot is important because the measure of damages can differ sharply depending on the cause of action pleaded. Section 2(1) is not interchangeable with negligent misstatement in tort or discretionary damages in lieu of rescission under section 2(2). Its fraud-based measure has attracted criticism, making the case useful for evaluative essays. A clear answer separates the conditions for liability, the causal link and the scope of recoverable loss before discussing remoteness or the intervention of another person.
Common exam questions about this case
Why was the ordinary negligence remoteness test not decisive?
The Court construed section 2(1) as directing the same damages measure as deceit. That permits recovery of loss directly flowing from the transaction without confining it to ordinary reasonable foreseeability. It does not eliminate causation: the claimant must still connect the loss to the contract induced by the misrepresentation.
Did the customer’s dishonest sale necessarily break causation?
No. An intervening dishonest act does not automatically remove the representor’s responsibility. The court considered the relationship between the misleading finance information, the resulting transaction and the customer’s disposal of the vehicle. On these facts it treated the loss as sufficiently connected, and also regarded that kind of conduct as foreseeable.
Why is it inaccurate to say all innocent misrepresentation receives fraud damages?
Royscot concerns liability established under section 2(1), whose statutory defence and other requirements must be considered. It does not impose that measure on every statement made without fraud. Section 2(2) and common-law or equitable remedies have distinct roles, so the specific cause of action must be identified before calculating damages.