Banks v Cox (No 2) (21 December 2000, unreported)
Contract law – Fraudulent misrepresentation
Facts
Mr and Mrs Banks brought a claim for damages for misrepresentation after buying a nursing home business and taking a lease of its premises from Mr and Mrs Cox. About 77% of the patients were state funded, and the home depended on the local authority for funding and referrals. The purchasers alleged that the vendors knew of a local-authority letter warning of budget cuts affecting the business but did not disclose it. In answer to a written pre-contract enquiry asking whether there had been a material change in the nature or conduct of the business since its last audited accounts, the vendors had given an unqualified “No”.
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Issue
The issue was whether the answer to the pre-contract enquiry was false in light of the vendors’ knowledge of the letter and its implications for the business, and whether that misrepresentation had induced the purchase. The claim concerned the accuracy of a positive answer to an enquiry, rather than an unrestricted duty to volunteer all information.
Decision/Outcome
At the retrial, Lawrence Collins J found in favour of the purchasers. He found that the vendors had received the letter and that the failure to disclose it when answering the pre-contract enquiry was deliberate or, alternatively, negligent. The answer about material changes was false, and the purchasers would not have bought the business or taken the lease but for the misrepresentation.
The vendors were held liable for fraudulent misrepresentation. The amount of damages was left for separate assessment.
Court and date: High Court, Chancery Division, Lawrence Collins J, 21 December 2000.
Related judgments: 17 July 2000 appeal ordering the retrial; 3 April 2001 permission-to-appeal application.
