Decision

The English High Court held that L30’s claims were time barred and so the claims failed on that basis. Notwithstanding that finding, the court went on to analyse L30’s claims and conducted a detailed analysis of the law on misrepresentation. The key principles of general application that arise from the court’s judgment are as follows:

1. Awareness – In all cases of misrepresentation, there must be a link between the representation and the inducement. This link had been referred to in a number of cases as the representation being the subject of an “understanding, or conscious thought, or active presence” or an “awareness” [para. 386 of the judgment]. In other words, the misrepresentation must have been in the “conscious thought” of the representee when they acted on it in order for a claim to arise
2. Single test – There is no single universal test that can be applied to establish awareness. The way in which the link is characterised and how the requirement is satisfied will “differ according to the circumstances of the case” [para. 388].
3. Assumption – It is always necessary to have awareness, which is distinct from “assumption”. However, the court acknowledged that “in simple cases the process of awareness and understanding may look like assumption” [para. 388].
4. Counterfactual of truth – A representee cannot establish awareness solely by reference to the counterfactual of truth (i.e., what the representee would have done had they known the true position). However, the court explained that the counterfactual of truth can be a “helpful test” in some cases; for example, if there is some doubt about whether a representation has been received or understood, it can provide some evidence which is relevant to deciding the question of whether there has been receipt or understanding [para. 391]. Furthermore, a representee cannot establish inducement by reference to the counterfactual of truth “without satisfying at least an awareness test” [para. 414].
5. Presumption of inducement – The requirement of awareness of a representation “logically … precedes the presumption of inducement” [para. 390]. The presumption of inducement allows inducement to be inferred where (i) a material representation is found to have been made and (ii) the claimant did enter into the contract.
6. Representation by conduct – There is still a need in representation by conduct cases for the claimant to establish an awareness or understanding of the representation that had been made. The court considered the previous case law on representation by conduct and explained that in those cases the representation was so “simple and obvious” that it could not be missed and therefore the understanding of the presentation “is not contentious” (see, in particular, paras. 413 and 414).
7. Practice point – Finally, the court held that a number of the misrepresentations alleged had been reverse engineered to fit the facts. The court’s comments were a reminder to parties not to construct representations to “dovetail with the specific facts” [para. 329].

Client Alert 2024-095