Article by Jamie Hughes

Mr Joshua Parker v (1) Skyfire Insurance Company Limited (2) Spectra Drive Limited [2024] EWHC 1060 (KB)

This case concerned a High Court appeal from the County Court at Liverpool and considered, primarily, an application by the Defendant for non-party disclosure under CPR 31.17. The underlying claim included a claim for credit hire following a road traffic accident.

The disclosure sought included recordings of telephone calls said to include representations made to the Claimant in advance of him signing the hire documents. While the focus of the original judgment and the appeal was on the application itself, this necessitated discussion about whether such evidence was likely to support or adversely affect either party’s case. Almost inevitably, this led to a discussion about misrepresentation in credit hire in more general terms.

The court made a number of important observations when considering the enforceability of hire contracts based on alleged misrepresentations:

• It is not uncommon in credit hire cases for the claimant to be told -incorrectly – that he or she will have no personal liability for the hire charges. (§24)
• There was rightly no suggestion in this case that the contract was unenforceable or invalid because Mr Parker did not understand what he was signing. It is well-established that it unnecessary for a contracting party to have understood the true nature of the contract in order to be bound by it: Burdis v Livsey [2002] EWCA Civ 510 (§31)
• The effect of a misrepresentation is only to render a contract voidable at the option of the innocent party. It is not thereby rendered automatically unenforceable. A voidable contract is valid unless and until it is avoided. Avoidance requires the innocent party to take some step to rescind the contract. Rescission is not available unless it is possible to make restitutio in integrum. A contract cannot be rescinded if it has been affirmed by the innocent party with full knowledge of the facts and of his or her right to avoid (§32).

The court highlighted that the two most relevant questions above related to affirmation and restitution.

As regards affirmation, the Court stated that the correct question was whether the Defendant could point to a real prospect that the contract is both capable of being avoided in principle, and, if so, might in fact be avoided by the Claimant. This would be a factual question to be addressed in each individual case. In Skyfire, the Court found that Mr Parker had brought his claim to recover the charges in express reliance on the hire contract and maintained his opposition of the disclosure application through counsel. The Court therefore concluded that there was no basis for suggesting he might seek to avoid the contract having not done so to date.

However, the Court went on to consider whether avoidance is an option open to the Claimant at all if restitution can no longer be made. The hire agreement in this case was a contract for services which had been fully performed. Mrs Justice Dias referenced Chitty in saying:

‘In this respect, a contract for services is very different from, for example, a contract for the sale of goods where the goods themselves can be returned, even if it might be necessary to make some allowance for depreciation. Although there are indications that the courts might be prepared to adopt a slightly more flexible approach to restitution than in the past, it is still the case that a fully performed contract for services cannot be rescinded: Chitty (op.cit) paragraphs 10-139 to 10-140”

‘This, it seems to me, is an insuperable obstacle to avoidance of the contract which exists independently of any misrepresentation or affirmation. It follows that even if the application were granted and even if the disclosure fully supported a case of misrepresentation, Skyfire would be unable to establish any circumstances in which Mr Parker would be relieved of his liability under the contract with Spectra’

Misrepresentation arguments are made on a daily basis in county courts up and down the country in credit hire trials, however courts very rarely address the underlying contractual principles and instead focus almost entirely on whether there has been a factual misrepresentation. This decision is a stark reminder that the underlying legal principles remain fiercely relevant and should be engaged with on each occasion. The High Court was at pains to point out that “it is not possible to lay down any general rules” (§29) however it is difficult to see how, in light of the passages referred to above, misrepresentation defences can succeed in relation to hire agreements which have been fully performed.