1. The fiction of fraud in s. 2(1) and the resultant treatment of a negligent statement maker as if they were fraudulent

Poole and Devenney, ‘Reforming Damages for Misrepresentation: The Case for Coherent Aims and Principles’ [2007] JBL 269.

Academic opinion supports the view that the fiction of fraud should relate only to establishing liability rather than the measure of damages being the same as for fraud. It is arguable that the remoteness rule for s. 2(1) should be the same as under Hedley Byrne (i.e. reasonable foreseeability) because these are basically alternative types of liability for negligent misrepresentation. By relying too heavily on the fiction of fraud, the CA has created a distinction between damages for negligent misstatements in tort and damages under s. 2(1) for negligent misrepresentation.

This can be criticized because:

•  There is a failure to draw any distinction between fraud and negligence.

•  An artificial distinction is created between negligent misstatement (Hedley Byrne) and negligent misrepresentation (s. 2(1)).

•  It requires a very literal statutory interpretation of the wording of s. 2(1).

2. Misrepresentation in the consumer context

The Law Commission consulted (Consumer Redress for Misrepresentation and Aggressive Practices, LCCP 199, April 2011) and reported (Law Com. No. 332, Cm. 8323, March 2012) recommending reforming the law on remedies to protect consumers in the event of misrepresentations and aggressive practices. The Law Commission pointed in particular to consumer problems in identifying the availability of rescission and the measure of damages where damages were available. It therefore proposed tiers of remedies designed to restore consumers to their original positions. Tier 1 remedies (available for all types of misrepresentations) related to ‘unwinding’ the contract through the return of goods and services within three months of delivery, and securing a refund of the price. If ‘unwinding’ was no longer possible, the consumer would still secure a discount on the purchase price. Tier 2 remedies would apply only if a consumer could prove they had suffered actual loss over and above their recovery through unwinding or discount on the price. It was recommended that these damages should cover consequential losses and also damages for distress and inconvenience.

The Consumer Protection (Amendment) Regulations 2014 (CP(A)R 2014) amended the Consumer Protection from Unfair Trading Regulations 2008 (CPUTRs 2008) to introduce consumer ‘rights to redress’ (Part 4A) in situations which would fall within actionable misrepresentations (‘misleading actions’ under Reg. 5), although not ‘misleading omissions’ so that in general terms omissions and silence would appear to be excluded from the CPUTR ‘right to redress’ regime.

Where the regime applies, the consumer has the right to unwind the contract by rejecting the product within 90 days, assuming that the goods or services have not been fully consumed or performed (Reg. 27E). This gives rise to a right to a refund for the consumer. Where the consumer has not exercised the right to unwind, there may be a right to a discount in complex circumstances which, by their very complexity seem inappropriate for the consumer context. The circumstances turn on the seriousness of the ‘misleading action’ and the difference (if any) between the contract price and the market price of the product at the time of the contract (Reg. 27I). Finally, there is a right to damages where the consumer has suffered consequential financial loss or ‘alarm, distress or physical inconvenience or discomfort’ as a result of the ‘misleading action’. Traders have a due diligence defence in respect of any right to damages. There is no further explanation of the basis on which these damages will be calculated. While the right to unwind seems clear, the right to a discount and the right to damages provisions under the CPUTRs appear more questionable—as does the omission of misleading omissions. By comparison, in its interpretation s. 2(1) MA has the advantage of being reasonably clear and generous to consumer claimants who seek to recover financial compensation for consequential losses.