Salt v Stratstone Specialist Ltd (t/a Stratstone Cadillac Newcastle)
Court of Appeal
Citations:  EWCA Civ 745;  2 CLC 269;  RTR 17;  CLY 529.
The defendant was a car dealer who sold the claimant a car. He wrongly told the claimant that the car was ‘brand new’ when it was not. After a year, the car exhibited defects and the claimant tried to get a refund. The defendant refused.
The claimant sued to have the contract rescinded for misrepresentation. The defendant responded that any claim for rescission was barred due to the claimant’s delay. They also argued that it was not possible to put the parties back in their original position (restitutio in integrum). This was because the car had been sold unregistered, and the claimant had since registered it. As such, the claimant could not return an unregistered car to the defendant.
- Was the claim for rescission barred by delay?
- Was restitutio in integrum possible?
The Court of Appeal held in the claimant’s favour. That the car had been registered did not prevent rescission from putting the parties back in their original position. Registration did not render the car a different object. To the extent that registration and use had lowered the value of the car, this was for the defendant to prove – and he had not.
In any case, the court explained that even if the value of the car had fallen, the court had a discretion to compensate the defendant for this while still rescinding the contract. It could make restitution contingent on the claimant paying the difference in value, for example.
The delay was not sufficient to bar rescission either. The claimant did not become aware that there was a problem for a significant amount of time, and so could not have sued earlier. Additionally, part of the delay was due to the defendant refusing to engage with the claimant and the normal litigation process. Therefore, the contract was rescinded.
This Case is Authority For…
Rescission is available for misrepresentation so long as ‘practical justice’ can be done. Restitutio in integrum only becomes impossible if the contract’s subject matter ‘been consumed or changed in some important way’ or there has been an interposition of third-party rights.
Delay is not, on its own, a bar to rescission. Roth LJ explained that delay only bars rescission if there is a ‘lapse of a reasonable time such that it would be inequitable in all the circumstances to grant rescission’. He described this as ‘in essence the principle of laches’. This generally requires the claimant’s conduct to amount to a waiver of their right to rescind.
The power under s.2(2) of the Misrepresentation Act 1967 to grant damages in lieu of rescission only arises if rescission is possible. This means that if the power to rescind has been lost (for example, due to delay), the court has no power to award damages in lieu.