Misrepresentation seeking to claim/defend by way of Misrepresentation
In certain proceeding buyers either allude to be discontented with their timeshare. Each of them believes that they were misled about the nature of what they purchased and identifies particular representations which were made to them during the sales process, which after reflexion they understand not to be true.
This gives rise to a potential claim to rescind a contract for damages for misrepresentation. A detailed review of the merits of each case is beyond the scope of this introduction; however it is necessary when considering the possibility of a claim for misrepresentation in taking into account how to approach a claim.
The first point to make is that in each case the relevant limitation period for misrepresentation may have expired. The ordinary period of limitation is six years from the date which the cause of action accrued (i.e. the date that each a person entered into the contract). However, in the case of fraudulent misrepresentation, the limitation period does not begin to run until the claimant discovered the fraud or could with reasonable diligence have discovered it.
Fraudulent misrepresentation is made out where it is shown that a false representation has been made:
Knowingly; without belief in its truth; or recklessly, careless, whether it is true or false; see Derry v Peek (1889) 14 App Cas 337.
The other requirements of the cause of action are that the representation must have induced the innocent party to enter into the contract and which the party making the representation must have intended the innocent party to rely on the statement. There is a rebuttable presumption of inducement where the misrepresentation was fraudulent.
It almost goes without saying that the buyer will need good evidence to prove fraudulent misrepresentation. Detailed accounts will be required from each buyer before the merits of their respective claims can be properly assessed. Buyers have a further difficulty if they signed a document entitled memorandum of understanding confirming, amongst other things, “they had not relied on any representations not recorded in the documents”. Such declarations are not fatal to a claim but certainly increase the standard of evidence required to prove the claim.
If and to the extent that people have used their timeshare after discovering that the representations made to them prior to their purchase were false, the party selling the timeshare will likely argue that the contract has been affirmed.
For present purposes then, it is sufficient to note that buyers do have a potential claim for misrepresentation but they will require good evidence of fraudulent misrepresentation to succeed and those people who signed the memorandum of understanding referred to above will face particular difficulty in proving their case. It would no doubt assist people if their claims could be heard together, as there is then more evidence before the Court of the nature of the selling techniques deployed on behalf of the club.
Who are the Defendants to a claim for Misrepresentation?
Typically, sellers facing a claim for misrepresentation should be the party who made the representation. However, if the representation was made by an agent on behalf of his principal, the principal will be liable.
Likewise, if “A” is induced by a misrepresentation made by “B” to enter into a contract with “C”, “A” may be able to set aside the contract with “C”, if “C” had actual or constructive knowledge of “B”’s misrepresentation;
The question is of importance because, fairly obviously, as a buyer can only rescind the contract as against the other contracting party. There is some difficulty in some actions because although the contract is with the seller, it is for membership of the club. In due course it may be argued that buyers may only rescind as against the club not the seller. That said most contracts state that they sell as agent of “the owner”, and it seems tolerably clear that is intended to refer to the club. But even in the case of the aforementioned proposition there is a good argument that the club would have been aware of the misrepresentations.
In any event, damages will be available against the sellers even if rescission is not.
Buyers may also sue the finance company who provided him with the credit to finance his purchase, pursuant to section 75 Consumer Credit Act 1974, which makes the finance company concurrently liable with the supplier. Obviously, that claim would be limited to damages and rescission would not be available, but the jurisdictional issues referred to below do not arise.
Buyers should consider whether they may have used finance in part (including a credit card) to fund their purchases and should discuss this with instructing solicitors.
Jurisdictional issues
The difficulty that immediately presents itself in bringing a claim against any the companies in the previous part of this advice as they are all based outside of the jurisdiction of the UK courts.
Misrepresentation against an Assignee
If the seller has the rights to assign any rights against a buyer then it will follow, that the assignee it must be a assignee of the party who originally had the right to receive (say) maintenance fees (either the club or the seller as the case may be).
It is therefore bound by such arguments as could rise against the original assignor, because an assignee takes his assignment subject to equities. It follows, in my view, that the claim to misrepresentation could be used as a defence to the claim or as a defence by way of set-off.
Ideally, buyers would want relief from the contract based on misrepresentation on a much wider scale. Defeating the claim may only avoid this year’s maintenance fees. Buyers could expect to receive claims against them in future years. Moreover, simply running the argument as a defence to the claim by a particular debt would not enable buyers to obtain full relief by way of rescission or damages.
In order for buyers to obtain any kind of more widely effective judgment, at least the representor’s would need to be party to the action. For the reasons I have highlighted above, however, it seems likely that any claim against the sellers or the club would need to be brought in a jurisdiction acceptable in the contract.
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk