“The normal principles apply in deceit, and so it must be shown that there is a sufficient continuing causal link between the misrepresentation and the loss which the representee claims to have suffered as a result of his reliance on it. This will be a question of fact; judges ask such questions as whether the representation was a substantial factor in producing the result, or whether in common sense terms there is a sufficient causal connection. The courts have drawn a distinction between the test for causation in relation to the claimant’s reliance on the misrepresentation, and the test for causation in relation to the loss he suffers in consequence of that reliance. Even if it [sic] the evidence shows that the claimant would still have entered into the contract if the misrepresentation had not been made, it is possible to hold that he did in fact rely upon it as long as it was present to his mind and acting as one of the factors he took into account in making his decision to enter the contract. However, the fact that the claimant might have acted differently had he not been induced by the misrepresentation is relevant to question of whether his loss was caused by the misrepresentation.”
“the need, in the context of a claim for damages for misrepresentation, to distinguish between two separate questions: (1) whether the claimant was induced by the misrepresentation to act to his detriment; and (2) if so, what loss he suffered in consequence. As Downs v Chappell shows, the fact that the claimant might have acted differently had he not been induced by the misrepresentation is not relevant to question (1), but it is relevant to question (2)…”
“85. Perhaps because of his background and his enthusiasm, he did not focus on the small print and failed to make the changes to the rent, the franchise fee, and the reference to Food Delicious. I have no doubt that his enthusiasm clouded his analytical ability; that he wanted this to work and he wanted to be part of it. 86. In this respect, it is a mark of his honesty, as I have indicated, that he was shown the figures shown in the new prospectus and said that he would possibly still have gone ahead, even if he had known the new figures, and I have asked myself what I need to make of this, if those figures are accurate. This of course is relevant to two respects: firstly, in terms of reliance and secondly in terms of conversation.”
“Stepping back and bearing in mind his desire for this to work, I am not satisfied that the figures contained in the business plan were the principal reason for him entering into the contract, but that of course is not the test; it must have been a factor; as I have indicated from the passage in Cartwright, where of course the learned author says it is sufficient if it is a cause. In that respect I am satisfied that the test in this respect is low, and I remind myself of the presumption; I am therefore satisfied that this was a significant factor. It fitted in with the broad pattern; had he seen accurate figures then that might have caused him to reflect, representing as it would something of a jarring note.”
“I have already observed that the issue of causation was not simply relevant to the issue of deceit, but also reoccurs in relation to the losses in this respect. Of course, the second claimant told me that he would possibly have entered into the contract in any event, and if that is right then a break in the causation may occur. On the balance of probabilities, I am not satisfied that the claimant would have entered into the contract if he had known the true situation.”
“The development of a single satisfactory theory of causation has taxed great academic minds... But, as yet, it seems to me that no satisfactory theory capable of solving the infinite variety of practical problems has been found. Our case law yields few secure footholds. But it is settled that at any rate in the law of obligations causation is to be categorised as an issue of fact. What has further been established is that the "but for" test, although it often yields the right answer, does not always do so. That has led judges to apply the pragmatic test whether the condition in question was a substantial factor in producing the result. On other occasions judges assert that the guiding criterion is whether in common sense terms there is a sufficient causal connection: see Yorkshire Dale Steamship Co. Ltd. v. Minister of War Transport [1942] A.C. 691, 706, per Lord Wright. There is no material difference between these two approaches.”
“In other words, it is not necessary in an action for deceit for the judge, after he had ascertained the loss directly flowing from the victim having entered into the transaction, to embark on a hypothetical reconstruction of what the parties would have agreed had the deceit not occurred.”
“It is also the case that the representation does not have to be the sole inducement for the representee to be able to rely on it to establish causation, as one can see from the decision of Morritt [sic] LJ at para 55 of his judgment in Barton. In this context, help can be found in the analysis of Stephenson LJ in JEB Fasteners Ltd v Marks Bloom & Co[1983] 1 All ER 583 at p 589: it is enough if the representation plays a real and substantial part, albeit not a decisive part, in inducing the representee to act; causation is then established.”
“As to that, the judge directed himself in law, at J(1) 543 - 546, as follows: (1) it is a question of fact whether a representee has been induced to enter into a transaction by a material misrepresentation intended by the representor to be relied upon by the representee; (2) if the misrepresentation is of such a nature that it would be likely to play a part in the decision of a reasonable person to enter into a transaction it will be presumed that it did so unless the representor satisfies the court to the contrary (see Morritt LJ in Barton v County NatWest Limited [1999] Lloyd's Rep Banking 408 at 421, paragraph 58); (3) the misrepresentation does not have to be the sole inducement for the representee to be able to rely on it: it is enough if the misrepresentation plays a real and substantial part, albeit not a decisive part, in inducing the representee to act; (4) the presumption of inducement is rebutted by the representor showing that the misrepresentation did not play a real and substantial part in the representee's decision to enter into the transaction; the representor does not have to go so far as to show that the misrepresentation played no part at all; and (5) the issue is to be decided by the court on a balance of probabilities on the whole of the evidence before it.”
“The plaintiffs have proved what they need to prove by way of the commission of the tort of deceit and causation. They have proved that they were induced to enter into the contract with Mr. Chappell by his fraudulent representations. The judge was wrong to ask how they would have acted if they had been told the truth. They were never told the truth. They were told lies in order to induce them to enter into the contract. The lies were material and successful; they induced the plaintiffs to act to their detriment and contract with Mr. Chappell. The judge should have concluded that the plaintiffs had proved their case on causation and that the only remaining question was what loss the plaintiffs had suffered as a result of entering into the contract with Mr. Chappell to buy his business and shop.”
“…A causal link is therefore required between the representor’s statement and the representee’s decision to act in such a way as to cause the loss he claims. But the representation need not be shown to be the only cause, or the main cause of the representee’s decision: it is sufficient if it is a cause.”
“Both Mr Djemil and Mr Wickham told me that they realised that the figures that had been used by Business Options had been based on the Manor House Gardens operation, which was an older and established operation and, as I have indicated, was the core café started by Mr Djemil. Therefore, on their own evidence, the defendants accepted that they altered the figures in the prospectus and that they had already revised those figures by the time that the second claimant’s sister opened her operation on10 September 2011 . I have to say in passing, and it is a matter I will return to later, that Ms Alleyne has cast considerable doubt on the updated figures contained in the second prospectus, and suggests that even they are not accurate. I observe at this stage that Mr Sawtell is right to point out that this is not part of Ms Alleyne’s pleaded case, but of course her pleaded case is that those figures were never made available to the claimants, and to that extent perhaps that is a sterile consideration.”
“101. I have spent some time already in this judgment considering his motivation, and important in that respect is what I have described as the consistency of the picture: the information that came on 26 September; the business plan on 27 September; the information from his sister, and his viewing of the café. …I have already in this judgment found that the reliance on the figures was an important factor in the claimant coming to the decision that he did. 102. In any event, on balance I am not satisfied that the updated figures that were shown to Mr Panesar were in fact accurate. I accept, of course, that they are projections and that therefore accuracy has to be seen through that prism. However, as Ms Alleyne pointed out during the course of cross-examination, the defendants had added a 15% figure to turnover for the first year, for three of the franchises, without any real justification, in my judgment; that there had been significant cuts in expenditure, again without proper explanation from Mr Wickham. Indeed, in that respect he sought to justify them, but came down to pure estimation. 103. In my judgment, taking into account the fact that this was a projection, this represented an unduly rosy view of the franchise operation, and I am not satisfied that the amended figures were accurate at all.”
“104 I rely upon the schedule that was emailed to me this morning by those who instruct Ms Alleyne, and have been seen by Mr Sawtell; very helpfully, that document includes cross-references to the relevant pages in the bundle. 105. There has been very little challenge in cross-examination to the figures that appear in this bundle. It was the case that Mr Sawtell cross-examined on whether or not credit had been given for the remuneration that had actually been received. It seems that that is the case from the third column in the schedule, relating to loss of earnings, and I accept the second claimant’s evidence which was largely unchallenged. 106. I paused to consider whether it is appropriate to make an award up to 2016 which, as Ms Alleyne points out to me, is to the end of the franchise. This engages the fact that the franchise was terminated in November 2014, and it is suggested therefore that the quantification should end at that point. I have to say that this was an issue that was not explored in any great detail during the course of evidence. 107. It was suggested that there were emails from Surrey Heath Council concerning the pitch and putt money, and that money may have been kept. That was put to Mr Panesar who gave explanations about arguments over VAT, and falling behind with the payments only because he was keeping that money until the VAT was sorted out; once it was sorted out, it was paid immediately. 108. I have not been asked to decide whether the termination of the contract was valid or not; there is insufficient evidence before me to suggest that it was a valid termination, and again I refer to the credibility issues to which I have already alluded. In the circumstances, therefore, I am satisfied that the 2016 figure is the correct figure, and I therefore award as per the schedule.”
“Repudiatory breach 41. There is no pleaded case that Ds were not entitled to terminate the franchise agreement in November 2014. Taking into account Clause 20 of the franchise agreement together with the evidence of Cs’ conduct, the court is entitled to consider that, neutrally, there is no material showing that Ds were not entitled to terminate.”