The death of mis-representation?

The appeal concerned the refusal of the defendant insurance company’s application for non-party disclosure against a credit hire company (“Spectra”) for recordings of telephone conversations with the claimant.

The defendant suspected that Spectra had either misrepresented its capacity (as being in some way connected with the claimant’s insurer) or alternatively, the circumstances in which the claimant would be liable to pay the hire charges [7].

Disclosure had been sought to advance a positive case of misrepresentation with a view to the claimant avoiding his contract with Spectra, such that he would have no liability that could be recovered from the defendant.

Applications for non-party disclosure are governed by CPR 31.17. CPR31.17(3) provides:

“(3) The court may make an order und

er this rule only where—

(a) the documents of which disclosure is sought are likely to support the case of the applicant or adversely affect the case of one of the other parties to the proceedings; and

(b) disclosure is necessary in order to dispose fairly of the claim or to save costs.”

Thus, there are two threshold conditions at (a) and (b) to be met before the court’s discretion to grant an order is engaged.

At first instance, Mr Recorder Michael Smith had found (in so far as is relevant here) that the ‘documents’ were necessary for the defendant to advance its case. However, he declined the application (in exercise of his discretion) on the basis that even if the disclosure demonstrated there had been a misrepresentation, the defence could still not succeed because the (credit hire) contract remained valid and enforceable until such time as the claimant chose to avoid it.

There was no indication that the claimant intended to do so and (pursuant to Irving v Morgan Sindall plc [2018] EWHC 1147 (QB) he would be entitled to recover hire charges even if his liability under the hire agreement was contingent upon his recovering damages from the defendant.

Various grounds were advanced on appeal before Mrs Justice Dias including a suggested inconsistency between the finding that the threshold conditions were met yet disclosure would serve no useful purpose and a suggestion that the finding of no useful purpose was itself perverse prior to the claimant giving evidence that would confirm the contract.

In determining the appeal, Mrs Justice Dias emphasised the need to consider the facts in each case, and on the facts of the case before her she found that only one of the threshold requirements (CPR31.17(a) was met: “the disclosure sought “may well” support Skyfire’s case on misrepresentation and is accordingly likely to do so.” [29].

In respect of the second threshold condition, Mrs Justice Dias identified at [30]:

“Skyfire must also satisfy me that the disclosure is necessary in order to dispose fairly of the claim or to save costs. But if there is no real prospect that the disclosure can make any difference to the outcome of the claim, it is difficult to see how it could ever be “necessary” to the fair disposal of the claim.”

Importantly, at [32], she observed that:

“i) The effect of a misrepresentation is only to render a contract voidable at the option of the innocent party. It is not thereby rendered automatically unenforceable.

ii) A voidable contract is valid unless and until it is avoided.

iii) Avoidance requires the innocent party to take some step to rescind the contract.

iv) Rescission is not available unless it is possible to make restitutio in integrum.

v) A contract cannot be rescinded if it has been affirmed by the innocent party with full knowledge of the facts and of his or her right to avoid.

vi) Affirmation is not confined to an express declaration or statement but may be found in conduct.”

On the facts before her, Mrs Justice Dias found that there was no real prospect that either the contract might be avoided by the claimant, or indeed that it was capable of being avoided:

• Affirmation is a question of fact [39], the claimant had affirmed the claim by conduct by:

  • bringing the claim to recover the credit hire charges [42];

  • attending the hearing [42];

  • opposing the application through counsel [42]; and:

  • having not changed his mind at this stage of proceedings; it was no more than fanciful that he might at trial [43].

• The credit hire contract was a fully performed contract for services which could not be rescinded [45]. That was “an insuperable obstacle to avoidance of the contract which exists independently of any misrepresentation or affirmation” [46];

Therefore, Skyfire would be unable to establish any circumstances in which Mr Parker would be relieved of his liability under the contract with Spectra. The Recorder was correct to find that disclosure would serve no useful purpose (such decision was not perverse), and that being so, it could not be said that ‘disclosure was necessary to dispose fairly of the claim or to save costs’, therefore the exercise of judicial discretion was not engaged because the application did not meet the threshold condition at CPR31.17(3)(b) [46-47]. Accordingly, the appeal was dismissed.

Comment

Throughout her decision, although Mrs Justice Dias sought to emphasise the fact specific nature of her findings, it is difficult to envisage a situation at trial when a positive case of avoidance might succeed in circumstances where a claimant has:

• signed a hire agreement;

• obtained the benefit of a fully performed contract for the services;

• advanced a claim for recovery of the resultant charges;

• not sought to avoid the contract pre-trial; and

• attended trial in support of the claim;

However, should there be any doubt, in the postscript to her judgment, Mrs Justice Dias observed at [60] that:

“..if the contract is tainted by misrepresentation, the question of avoidance is one which arises solely between the claimant and the credit hire company. It is no concern of the defendant (or his or her insurer) unless there is some suggestion of fraud.”

County Courts are bound by the High Court authority of Parker v Skyfire and thus should be less willing to entertain defendant arguments of misrepresentation in future cases.

Stuart Nicol represented Spectra on the appeal.

The decision can be found via the link https://caselaw.nationalarchives.gov.uk/ewhc/kb/2024/1060