Misrepresentations during the selling process

At what point do misleading statements in a selling process become misrepresentations?

The background

Ms Burki, a divorced mother of three, was seeking a romantic partner.  She signed up to the matchmaking service Seventy Thirty Ltd (70/30) in late 2014, paying £12,600 for a year’s membership.

Before signing up, 70/30’s managing director assured her that the database contained a substantial number of wealthy men, a number of whom fitted her criteria.  On the basis of those responsibilities, Ms Burki claimed she had been induced to become a member.  She ended her membership after five months.

Subsequently, Ms Burki wrote two highly critical online reviews of 70/30, one on Google and one on Yelp.  In the former, she claimed the service was a scam.  In the latter, she said customers were coerced into accepting unsuitable matches and that the business did not provide the services it promised. 

Ms Burki requested a refund, but her request was refused.  She ultimately sued 70/30 on the grounds of misrepresentation and deceit.  70/30 counterclaimed for libel and malicious falsehood.

The decision

The judge took a critical view of the 70/30 database.  There was a shortage of active paying members as the evidence showed that there were closer to 100 active members and could not “by any stretch of the imagination” be described as a substantial number.  The judge found that the status of the men in the database was not clear from 70/30’s terms and conditions, albeit Ms Burki acknowledged she had not read them.  The representations made to Ms Burki had been untrue and misleading; she would not have joined if she had known the true status of the database.  The composition of the database should have been made clear to her.  If it had been, Ms Burki would not have had cause for complaint.

It followed that Ms Burki was refunded her membership fee (£12,600) and awarded a small sum of damages for distress (£500).  Her claim for deceit did not increase her damages, as Ms Burki’s loss was the sum of her membership fee, which she was already receiving back from 70/30.

The judge found that the first of the reviews left by Ms Burki was defamatory and likely to cause serious harm and financial loss; it was not true that 70/30 was fraudulent or a scam.  The damages for this were assessed at £5,000.  The second review was also defamatory, but was found to be Ms Burki’s true and honest opinion.  The claim of malicious falsehood was unfounded, as they were written in the belief, albeit an erroneous one, that her complaints were justifiable.

Why is this important?

This case highlights the importance of being clear with customers about the nature of what they are being sold.  It emphasises that attempts to imply to customers that a service will provide more than it is capable of doing can amount to misrepresentation.  The courts will not tolerate companies deliberately making a situation unclear.

Any practical tips?

Note that, even if a non-reliance clause had been included in 70/30’s terms and conditions, it would not have absolved 70/30 of liability for fraudulent misrepresentation.  If the misrepresentation had been negligent, a clause attempting to exclude liability would have had to pass the fairness test under the Consumer Rights Act 2015.