Thomas Witter Ltd v TBP Industries Ltd [1996] 2 All ER 573

Facts

• Thomas Witter Ltd purchased a business from TBP Industries Ltd.
• TBP Industries Ltd provided incorrect financial details relating to the business.
• After the errors were discovered, Thomas Witter Ltd sought to rescind (end) the contract.
• The trial judge exercised discretion under section 2(2) of the Misrepresentation Act 1967, awarding payment instead of rescission.

Issues

1. Whether the court had discretion under section 2(2) of the Misrepresentation Act 1967 to award damages instead of rescission when a misrepresentation was found.
2. What factors influence the court’s decision to grant damages in lieu of rescission.
3. How the seriousness of the misrepresentation and attendant harm to each party affect the choice of remedy.

Decision

• The Court of Appeal upheld the trial judge's decision, confirming that section 2(2) grants judges discretion to award damages instead of rescission for misrepresentation.
• The default remedy is rescission, but the party responsible for the misrepresentation must show why damages should be awarded instead.
• The court emphasized that judges must weigh the seriousness of the misrepresentation, the practicality and fairness of rescission, and whether damages would sufficiently address the harm.
• Payment (damages) is appropriate when ending the contract would unfairly harm the misrepresenting party, particularly for minor misrepresentations and where reversal is impracticable.

Legal Principles

• Section 2(2) of the Misrepresentation Act 1967 allows courts to award damages in lieu of rescission for misrepresentation, deviating from the historical emphasis on rescission.
• The seriousness of the false claim and harm to both parties guide the remedy; minor misrepresentations may lead to damages, while major misrepresentations often justify rescission.
• Courts must consider elapsed time and the feasibility of unwinding the contract in deciding on the appropriate remedy.
• Damages under section 2(2) aim to compensate for losses caused by the misrepresentation while the contract remains valid, differing from remedies for fraud which focus on restoring the parties to their pre-contract positions.
• Precedents such as William Sindall plc v Cambridgeshire County Council [1994] 1 WLR 1016 and Salt v Stratstone Specialist Ltd [2015] EWCA Civ 745 clarify that fairness and harm are central to the court’s exercise of discretion.

Conclusion

The court confirmed that section 2(2) of the Misrepresentation Act 1967 grants judges discretion to award damages instead of rescission, requiring careful assessment of the misrepresentation's seriousness, balancing harm to each party, and ensuring remedies are fair and practical in the context of the contract and its effects.