Dear all

To me the decision appears to rest on the concession of counsel
(recorded at paragraph 105) that there was a contractual relationship
between T and R as well as between T and D. The difficulty in the
decision is in squaring that concession with the statement in
paragraph 105 that R was not a party to the contract between T and D
but that the contract between T and D created a contractual
relationship between T and R. One interpretation of what the Court
intended (though it did not have to and in fact did not make the point
explicit) was that a collateral contract between T and R came into
existence, consequent on the conclusion of the main contract between T
and D. That throws up issues under S. 2, if the Court went on to
conclude that T suffered no loss because of its colateral contract
with R but only suffered loss because of their contract with D. That
is not a finding the Court makes however and it is unclear whether the
Court accepted counsel's submission that T only suffered loss because
of its contract with D. If the Court held that T proved it suffered
loss on foot of its contractual relationship with R, then it was
presumably free to apply S. 2 without difficulty.

The full treatment of this issue in the judgment concerning this issue
is as follows:

"Relevant contract ?

103. Mr Béar submitted that s2(1) has no application in the
circumstances of the present case because (i) the remedy under s. 2(1)
of the 1967 Act is only available against the other party to the
contract under which the loss is suffered; and (ii) the "contract"
under which Taberna sustained the reliance loss which it now claims
(the price it paid for the purchase of the subordinated notes) was the
contract with Deutsche Bank to which Roskilde was not a party. Thus,
Mr Béar submitted that the claim under s2(1) of the 1967 Act fails at
the outset.

104. In support of that submission, Mr Béar relied on a number of
points which he summarised in his closing submissions as follows:


i) S2(1) was designed to regulate pre-contract negotiations. A
contracting party can regulate all the terms of the bargain as well as
the content of his pre-contractual statements. The former can take
account of the latter, the most obvious examples being by choosing not
to enter into the bargain at all, or by requiring exclusion clauses
which (subject to the statutory reasonableness controls imposed in the
same enactment) the representor can also agree with his counterparty,
the representee, as well as by any other adjustment of other terms. If
entry into the contract with the representor causes the representee
loss, the representor can be made responsible for that loss in the
same way as a fraudster, i.e. the tort measure.

ii) This coherent scheme does not hold for the present case brought
against Roskilde where the pre-contract negotiation was between the
parties to the sale contract, Taberna and Deutsche Bank. In
particular:

a) While correct that the result of that contract was to bring
Roskilde and Taberna into a contractual relationship, that is
fortuitous. The asset in question might as easily have been rights
against borrowers rather than against Roskilde, for example, if the
asset had been a package of loans originally granted by Roskilde.
b) The loss sustained by Taberna, and claimed in this action, was the
price paid to Deutsche Bank under the contract with Deutsche Bank. No
loss was sustained as a result of entering into the contract with
Roskilde. This can be easily tested by considering what claims for
damages Taberna could make if it could not plead its contract with
Deutsche Bank - the answer is none, since it is the price under that
contract which is the claimed loss.
c) Point (b) above is sufficient to take the case outside s 2(1).
Further, the operative contract was that between Taberna and Deutsche
Bank. That contract alone was induced (if anything was induced) by
representations made by Roskilde; the contract between Roskilde and
Taberna was simply a consequence of Taberna having acquired the notes
from Deutsche Bank and was not itself induced by any representations.

105. As to these submissions, I readily accept that the facts of the
present case are somewhat unusual. In particular, this is not a simple
case of only two parties (A and B) where a representation is made by A
to B and, in reliance on such representation, B enters a bilateral
contract with A. Here, the position is more complicated. Thus, it is
plain that at least certain pre-sale negotiations took place between
Deutsche Bank and Taberna; that Taberna entered into a contract with
Deutsche Bank; and that it was pursuant to that contract (to which
Roskilde was not a party) that Taberna acquired the subordinated notes
from Deutsche Bank. However, there is equally no doubt, and Mr Béar
accepted, that the effect of such acquisition was to bring Taberna and
Roskilde into a contractual relationship - although the precise
mechanism whereby such contract came into existence is not entirely
clear to me. It is perhaps also noteworthy that, contrary to a
"normal" contract, the consideration for the subordinated notes i.e.
the purchase price was paid by Taberna to Deutsche Bank not Roskilde.
However, I am unpersuaded that these somewhat unusual features take
the present case outside the scope of s2(1) although, of course, the
burden remains on Taberna to prove the matters referred to above. For
the avoidance of doubt, I would emphasise that if the position were
that the relevant representations were made by Deutsche Bank rather
than by Roskilde, then, of course, Taberna could have no claim against
Roskilde under s2(1): cf: Chitty on Contracts, (31st Edition) Vol 1
para 6-024. However, that is not the case advanced by Taberna."


On 3/31/15, Sarah Green <sarah.green@st-hildas.ox.ac.uk> wrote:
> I share it. The common law seems committed to making this into an Act for
> claimants.
>
> Sarah
>
> From: Andrew Tettenborn [mailto:a.m.tettenborn@swansea.ac.uk]
> Sent: 30 March 2015 16:14
> To: obligations@uwo.ca
> Subject: English Misrepresentation Act 1967
>
> A puzzling case today of interest to those who follow the fortunes of the
> English Misrepresentation Act 1967. In Taberna Europe CDO II Plc v Selskabet
> AF1 [2015] EWHC 871 (Comm), Taberna bought loan notes issued by Roskilde, a
> thoroughly bad Danish bank, on the secondary market from Deutsche Bank. They
> did so on the basis of negligent misrepresentations by Roskilde, and in due
> course claimed against the successor body to Roskilde, which it was arguable
> under Danish law had to pick up the tab for misrep claims.
>
> They successfully recovered EURO 26 million under s.2(1) of the MA 1967. This
> says:
>
> "Where a person has entered into a contract after a misrepresentation has
> been made to him by another party thereto and as a result thereof he has
> suffered loss, then, if the person making the misrepresentation would be
> liable to damages in respect thereof had the misrepresentation been made
> fraudulently, that person shall be so liable notwithstanding that the
> misrepresentation was not made fraudulently, unless he proves that he had
> reasonable ground to believe and did believe up to the time the contract was
> made that the facts represented were true."
>
> The obvious riposte, made forcibly by the defendant, was that Taberna bought
> from Deutsche and the representations were made by Roskilde. But Eder J was
> having none of it. By buying the notes Taberna were put into direct
> contractual relations with Roskilde, one imagines by assignment, and
> (apparently) this was therefore a case where "a person has entered into a
> contract after a misrepresentation has been made to him by another party
> thereto". (See [105]).
>
> Does anyone share my immediate instinct that this is a very rum
> interpretation of the 1967 Act?
>
> Andrew
>
>
> --
>
>
> Andrew Tettenborn
> Professor of Commercial Law, Swansea University
>
> Institute for International Shipping and Trade Law
> School of Law, University of Swansea
> Richard Price Building
> Singleton Park
> SWANSEA SA2 8PP
> Phone 01792-602724 / (int) +44-1792-602724
> Cellphone 07472-708527 / (int) +44-7472-708527
> Fax 01792-295855 / (int) +44-1792-295855
>
> Andrew Tettenborn
> Athro yn y Gyfraith Fasnachol, Prifysgol Abertawe
>
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> Ysgol y Gyfraith, Prifysgol Abertawe
> Adeilad Richard Price
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>
>
>
>
> Lawyer (n): One versed in circumvention of the law (Ambrose Bierce)
>
>
>
>
>
>
> ***
>
>