Neither depreciation, intermittent use nor delay prevented a purchaser from rescinding a contract to purchase a 'brand new' car and recovering the purchase price.
In Salt v Stratstone Specialist Ltd (T/A Stratstone Cadillac Newcastle) (Stratstone), in 2007, Stratstone sold Salt a 'brand new' luxury sports car. The car was not, however, brand new. Although un-registered, it was two years old, had been in a collision and had had various repairs to it.
Following purchase, defects arose and in 2008 Salt sought to reject the car and recover the purchase price. Stratstone refused. Salt issued proceedings in 2009 alleging the car was not of merchantable quality. Following disclosure of documents showing the car was not new, the claim was amended in 2011 to include claims for misrepresentation under s2 of the Misrepresentation Act 1967 and rescission.
At first instance
The County Court District Judge accepted Salt had relied on the misrepresentation that the car was brand new and so would not have bought it had he known its history. However, the court found rescission was not possible as the parties could not be returned to their original pre-contract positions: the car could not be returned as an unregistered car, there had been a substantial delay between purchase and claiming rescission and there was no evidence as to how the purchase price could be adjusted to allow for depreciation.
Damages were awarded instead in the sum of £3,000, being the difference between the value of the car had it been new at the time of purchase and its actual value.
The judge held it was possible to restore the parties to their original positions as the car still existed, registration was not a bar, the risk of depreciation was a risk for Stratstone as the misrepresentor, not Salt, and the delay was not so long as to be a bar. The court ordered rescission and the return of the purchase price.
The Court of Appeal
The Court of Appeal held that neither depreciation nor intermittent use prevented restitution. Rescission was the normal remedy for misrepresentation and was available if "practical justice" could be done; such as the representor being compensated for depreciation ,or an allowance for use being made. It was for the representor to assert and prove such elements, not the innocent representee.
The damages awarded were insufficient compensation for the wrong suffered and the purchase price would be recovered. Delay in this case was not a bar as Salt only discovered the age of the car following disclosure of documents in the proceedings. It would be unfair to say that as he was too late to reject the car, he was also too late to rescind the contract.
If a misrepresentation is proven, the equitable right to rescind the contract may still exist; unless the contract has been affirmed, innocent third party rights have intervened, there has been an excessive time lapse (making rescission inequitable) or restitution is impossible for some other reason.
Readers are also reminded of the consumers' new tiered rights to reject contained in the Consumer Rights Act 2015, which comes into force on 1 October 2015 as highlighted in our May article.
This article was written by Greg Standing and published in the August 2015 issue of Motor Finance.