Banks v Cox

Banks v Cox (No 2) (2000) unreported

Contract law – Fraudulent misrepresentation

Facts

B brought a claim for damages for misrepresentation after acquiring a nursing home business that was previously managed by C. 77% of the nursing home’s turnover was provided for by local authority/state funding. B claimed that C had not disclosed a letter from a local authority which stated that the business would likely be negatively affected by budget cuts in the social security sector. As a result of failing to disclose this information, B claimed that C also had stated that there was no material change in the conduct of the business since the date of the previous communication and that this was a negligent or fraudulent misrepresentation.

Issue

The issue for the court, in this case, was whether the fact that C had not informed B of the letter from the local authority which affected the business, could constitute fraudulent misrepresentation. If so, B’s reliance on the information provided by C must also be proven for the claim to be successful.

Decision/Outcome

The court found in favour for B on the basis that C had been aware of the letter from the local authority and had not disclosed this prior to the exchange. To the court, the change of policy from the local authority reflected a material change to proceedings which should have been disclosed. B had relied on the lack of disclosure of this information and therefore C was found liable for fraudulent misrepresentation. As a result of this finding, C was required to pay damages to B.