Ian, an investment broker, wasapproached by Victor who asked him whether he should invest in WonderElectronics Ltd. Ian said " You certainly should, Lord Wellybob is a director.It is a very sound company. It is my view that it will go from strength...

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Ian, an investment broker, was approached by Victor who asked him whether he should invest in Wonder Electronics Ltd. Ian said “ You certainly should, Lord Wellybob is a director. It is a very sound company.  It is my view that it will go from strength to strength. In fact, I own 5,000 shares myself which I can let you have.’ Victor then bought the shares for 10,000 . The company went into liquidation a month later. The shares are now worthless. It now turns out

  1. that Lord Wellybob resigned from his directorship a week after Ian’s statement was made.

  1. that Ian’s statement regarding the prospects of the company was based on a report in a financial journal which was intended to refer to Wonder Electronics Ltd but gave the name of  Wander Electronics by a printing error.

Advise Victor;

SUGGESTED ANSWER:

In advising Victor it has to be determined whether he can sue Ian for misrepresentation on breach of terms of contract. Victor will first be advised whether he can sue for misrepresentation.

Misrepresentation has not been defined as a statement of fact which is untrue and which induces the other to enter into the contract. To sue for misrepresentation Victor must prove that:-

  1. the statement made by Ian were statement of fact
  2. and the statement had induced him to enter into the contract.

The following 3 statement made by Ion are relevant for an actionable misrepresentation

  1. that Lord Wellybob is a director
  2. that the company is very sound
  3. that in his view it would go from strength to strength

Victor will now be advised as to whether Ian’s statement are statement of fact.

Statement 1

“Lord Wellybob is a director” is a statement falsified by later events. General rule is that the must be a statement and therefore silence on non-disclosure do not amount to misrepresentation Keates v Cadogon (1951). Here if Victor entered into contract before Lord Wellybob’s resignation, there would be no element of falsity. But if Victor enter into contract affer the resignation then it would be regarded that Ian’s statement as a continuing representation which will be falsified by the subsequent events. As such Ian is under a duty to disclose the new facts, With  v O’ Flanagan (1936)

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Statement 2

“It is a very sound company” is a statement of opinion on belief incapable of actual proof then it is not actionable, Bisset v Wilkinson (1927). Certainly Ian used the words “It is my view” which suggested that the statement is one of opinion not a fact. However there are exception to the rule. Firstly that the representor did not honestly hold the opinion, secondly that a reasonable man possessing his knowledge could not honestly have held the opinion and thirdly if the representor has better knowledge of the facts upon  which  his  opinion is based ...

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