Royscott Trust Ltd v Rogerson [1991] 3 WLR 57

Facts

  • Royscott Trust Ltd, a finance company, entered into a hire-purchase agreement with Mr. Rogerson for a car.
  • A car dealer provided Royscott with incorrect information regarding the car’s price and deposit.
  • Relying on this information, Royscott approved the finance deal.
  • Mr. Rogerson subsequently defaulted on payments and sold the car.
  • Royscott Trust Ltd sought damages from the dealer under section 2(1) of the Misrepresentation Act 1967.

Issues

  1. Whether damages awarded under section 2(1) of the Misrepresentation Act 1967 should be calculated on the same basis as damages for the tort of deceit.
  2. Whether liability for damages under the Act extends to all direct losses resulting from the misrepresentation, regardless of foreseeability.

Decision

  • The Court of Appeal held that section 2(1) of the Misrepresentation Act 1967 introduced a “fiction of fraud”.
  • Damages must be assessed as though the misrepresentation had been made fraudulently, even if it was not.
  • The defendant was held liable for all direct losses caused by the misrepresentation, without restriction to reasonably foreseeable losses.
  • The Court rejected arguments to limit damages to the standard of negligence, confirming that the directness rule applies.

Legal Principles

  • Section 2(1) of the Misrepresentation Act 1967 requires that damages for misrepresentation be assessed as for the tort of deceit, not negligence.
  • The “fiction of fraud” principle means liability covers all direct consequences of the misrepresentation, irrespective of foreseeability.
  • The ruling strengthens the protection for parties relying on statements made during contractual negotiations.
  • The principle has been maintained in subsequent case law, despite academic and judicial criticism concerning potentially heavy liability for innocent misstatements.

Conclusion

Royscott Trust Ltd v Rogerson remains a leading authority confirming that damages for misrepresentation under section 2(1) of the Misrepresentation Act 1967 are assessed as for deceit, imposing liability for all direct losses flowing from the misrepresentation, regardless of foreseeability.

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