Misrepresentation, 2010: Duty and public notice in the UK, PLC

The audited financial statement prepared by Bumble & Co, on behalf of Horizon PLC 'made public' the performance of the corporation: reporting earnings of £10 million. Where published, shareholders and other stakeholders may 'assume' official and final writing according to the Statute of Frauds, which stipulates that public notice of the company's profit and loss constitutes reliability to the shareholders and other stakeholders, and assumes that those parties are in agreement to those activities. Analysis of Horizon, Plc v. Bumble & Co. will be subject to decision based on UK laws on Misrepresentation and unfair commercial practices under the Unfair Commercial Practices Directive 2005/29/EC ("UCPD") which came into force 26 May 2008. The 2008 law on misrepresentation is preceded by the UK Misrepresentation Act of 1967 (OPSI, 1991).

Preface to the discussion is what rule elements are not at play within the fact pattern presented in Horizon, Plc v. Bumble & Co., or related matters to the case. There are no known third party, intermediated securities firms involved in the foregoing review of the rights of the investors, the role and obligations of the issuer, and the defense of the accounting firm (Gullifer and Payne 2010). Preliminary to examination of the case, acts of 'false statements' as defined by UK Law do not appear to be present. There is also no intentional deceit. Where cases of such public profit and loss reporting deemed detrimental to shareholder parties are defined by those directives, in articulation of the conditions and terms of stock purchase agreements (Beale, Fauvarque-Cosson, and Rutgers et al. 2010).

Laws on Misrepresentation cover most of the legal decision on Horizon, Plc v. Bumble & Co. And stipulate that Horizon, Plc, the misrepresentee pursuer, "must still establish his case in negligence." This is also substance to decision on merchant to merchant transactions, where public notice about Plc holdings consitute delictual liability for negligence that the misrepresentor defender has breached a pre-existing duty of care which he owed the pursuer (Misrepresentation and unfair commercial practices, 2008). It is also suggests that the rule does not apply to external parties not represented by the misrepresentor and misrepresentee or parties to the same contract. This excludes obligation by individuals as 'employees' to those misrepresented parties, where personal liability to the complaint is not determined. Section 9 to the law on Misrepresentation defines the measure of damages in the case of 'both fraudulent and negligent misrepresentation is the usual measure for delictual damages;' and where as illustrated in Table 1.

Table 1

10. Fraudulent, the consumer may recover all losses arising directly from the transaction irrespective of foreseeability.In such circumstances, an award of damages may include the losses which the consumer has incurred as a result in a drop in market value of the asset involved in the transaction.

11. Negligent, the measure of damages is dependent upon whether the misrepresentation took the form of advice or the provision of information. If the misrepresentor advised the misrepresentee to take a course of action, liability is for all foreseeable loss incurred as a result of that course of action; such liability may include losses incurred as a result of external factors. Whereas if the misrepresentor merely provided information, liability is limited to the foreseeable consequences of that information being wrong.

Table 1. Sections 10 & 11 (Misrepresentation and unfair commercial practices, UK 2008).

Enforceability of the contract between Bumble & Co. And Horizon is a merchant agreement, falling under the scope of the UK contract law where accounting services are considered in the scope of professional practice attributed to accountants and other service providers such as physicians, where licensure circumscribes contractual obligations of the professional party to 'duty;' and specifically to 'duty to a reasonable standard of care' in part to the promise to performance.

In cases where the professional party has not upheld duty and the result is a measurable and material liability to the defendant, negligence may be found. Forewarning of risks and release from liability to incorrect reporting in error by Bumble & Co., may protect the firm from apportioned liability where it is found that Horizon would have sustained losses in spite of reporting, yet this is unlikely given the reliance that the company and its current and near future shareholders like Allison will have on the final legal writing and its public notice.

Was it a case of Bumble & Co. willful contract interference? For a contract to be enforceable, the terms of the agreement must be ascertainable to a reasonable degree of certainty. Breach of contract, and contractual negligence are formative to a legal complaint of fraud and misrepresentation;...

Normative low performance was replaced by sharp losses to earnings when the news that Horizon's shares were not performing according to the earlier report.
Remedies available to the victims of misrepresentation are dependent upon varied factors, and also the mens rea, or mental state of the misrepresentor at time of tortfeasor. Whether the misrepresentation was innocent, negligent or fraudulent, or a combination of two of those elements to the rule, at time that the trader or by another party acting on behalf of the trader committed the offence. Cause of action and remedies to violations to Misrepresentation are illustrated in Table 2.

Table 2

Cause of action

Remedy

Breach of contract

Rescission, if the breach is material, and contractual damages.

Fraudulent misrepresentation

Reduction of the contract; delictual damages in respect of all losses arising directly from the transaction irrespective of foreseeability; or both.

Negligent misrepresentation

Reduction of the contract and:

in the case of negligent advice, delictual damages in respect of all foreseeable losses incurred as a result of the advice; or in the case of negligent information, delictual damages in respect of all foreseeable losses incurred as a result of the information being wrong.

Innocent misrepresentation

Reduction of the contract and restitutio in integrum.

(There is no scope for the court to award damages in lieu of reduction).

Table 2. Misrepresentation (Misrepresentation and unfair commercial practices, UK 2008).

Although false statements or verba jactantia (i.e. puffing) is not evident in the fact pattern of Peter's actions in the case, the misrepresentation made on behalf of Bumble & Co. will be found as it is material; and a common factor which induced a reasonable part(ies) to enter into the contract. Since the criteria for misrepresentation is operative, and there are no other averments with exception of mitigation to negligence where prolonged attention to legal writing revision may have been subject to forewarning post Peter's accident, fault on the part of the trader, Bumble & Co. may ensue within court decision up to punitive damages. Reduction to the contract, an incremental step to redress in some jurisdictions in UK law, is pertinent to validity, albeit voidable constitution of the contract, and its persistence between the parties.

Even where contract interference is not the result of willful detriment to the obligee, the third party entrance of Peter and Alison as plaintiffs in suit against Bumble & Co. For as accountable to their losses may only result in compensatory damages to their independent complaint if they actually: 1) suffered material damages resultant from contractual relationship with Bumble & Co.; and 2) if it is evidenced that Bumble & Co. actions were intentional, willful, and in wanton disregard of their rights. While it is indisputable that Bumble & Co. violated contract with Horizon, Plc as licensed preparer of an inaccurate public financial statement, which it also published and is recorded to have volitionally advertised as a business opportunity to potential shareholders of the client, punitive damages in the form of monetary remedy will only be redeemed where relevant.

Alison purchased 200 Horizon shares based on the credibility of the Bumble & Co. audited public financial statement. Unlike contract law pertaining to price of advertised products, investment in a corporation's holdings is mutual assent to agreement that the stockholder's contractual relationship constitutes part ownership in the corporation. In Preferred Mortgages v Shanks, the provision of negligent information and negligent advice led to the pursuer's reliance upon the defendant, surveyor's valuation of properties for which security was taken and the advice of the solicitor as to title thereof, where 'the surveyor had, however, negligently declared the open market value of the properties to be £1,240,000; when in fact the properties were worth only £924,000.' It was found that the solicitor had been negligent in the advice where adequacy of the title to the subjects over which security was taken was considered, and especially where title to rights of access (Misrepresentation and unfair commercial practices, 2008).

Liability assumed in regard to financial profit and loss, and controlling interests (i.e. assets) in the corporation may where not a public limited company (Plc); where liabilities are limited to the licensed corporation's title, where debts and other obligations to negligence complaints are concerned. The Plc status of Horizon serves as an instrument of immunity in the case of fiscal and other liabilities created in the scope of Horizon's activities, protecting shareholders, and also in most cases, directors, of the company. Earnings…