Howard Marine and Dredging Co Ltd v A Ogden & Sons (Excavati...

Facts

• Ogden, the defendants, hired two barges from Howard Marine, the plaintiffs.
• Howard Marine provided incorrect cargo capacity figures, relying on Lloyd’s Register, a shipping reference.
• The accurate capacities were available in the barges’ German documents, which Howard Marine possessed but failed to consult.
• Ogden relied on the figures given and entered into a contract, later discovering the true capacities differed.
• The dispute centered on the false statement affecting the contract, and the allocation of responsibility for it.

Issues

1. Whether Howard Marine’s reliance on Lloyd’s Register, despite having access to correct German documents, constituted negligence under section 2(1) of the Misrepresentation Act 1967.
2. Whether the burden of proof under section 2(1) required Howard Marine to show reasonable grounds for believing the statement was true.
3. How the allocation of responsibility for pre-contractual misstatements is determined in light of section 2(1).

Decision

• The Court of Appeal held Howard Marine made a negligent misstatement by not checking the correct German records.
• The ruling clarified that section 2(1) of the Misrepresentation Act 1967 shifts the burden to the representor to establish an honest and reasonable belief in the truth of their statement.
• Howard Marine failed to demonstrate reasonable grounds for their belief, given their access to the accurate records.
• Damages were to be awarded as if the representation had been made fraudulently, unless the representor discharged the statutory burden, which Howard Marine did not.

Legal Principles

• Section 2(1) of the Misrepresentation Act 1967 mandates that a representor who has made a false statement must prove they had reasonable grounds to believe its truth.
• The test combines honesty with objective reasonableness, requiring proper checks and factual basis for statements.
• Misrepresentation liability is more readily established in commercial negotiations when the representor fails to verify available information.
• The case highlights the importance of accuracy and documentation in statements during contractual negotiations.

Conclusion

Howard Marine and Dredging Co Ltd v A Ogden & Sons (Excavations) Ltd [1978] QB 574 is a leading authority on the allocation of responsibility for negligent misstatements in contract law, establishing that the representor bears the burden of proving a reasonable basis for belief in their statements under section 2(1) of the Misrepresentation Act 1967, thereby emphasizing the necessity for diligence and substantiated accuracy in contractual dealings.