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Where am I now? Lawlink > Law Reform Commission > Publications > 4. Proposed Reform in Other Jurisdictions
Report 57 (1988) - Community Law Reform Program: Fourteenth Report - Representations As To Credit
4. Proposed Reform in Other Jurisdictions
4.1 It is pertinent at this point to consider recommendations for reform made by law reform agencies in other jurisdictions in respect of provisions corresponding to s6 of Lord Tenterden's Act.
1. ENGLAND
4.2 In England, the Law Revision Committee was appointed in 1934 to report inter alia:
whether all or any of the following enactments should be amended or repealed:
Statute of Frauds, 1677 s4
Statute of Frauds Amendment Act, 1828
Mercantile Law Amendment Act 1856
Sale of Goods Act, 1893, s4.1
The Committee issued an Interim Report in 1937 recommending reform of the Statute of Frauds 1677, Mercantile Law Amendment Act 1856 and the Sale of Goods Act 1893. It did not, however, consider the Statute of Frauds Amendment Act 1828. In respect of the Statute of Frauds 1677 the Committee recommended that s4 be repealed, although a minority recommended that the requirement of writing for contracts of guarantee be retained. In 1952 the Law Reform Committee considered whether the recommendation made in 1937 by the Law Revision Committee should be adopted in whole or in part. In its Report2 published in 1953 the Committee recommended inter alia that the earlier minority recommendation be implemented in relation to s4 of the Statute of Frauds. This recommendation was implemented by the Law Reform (Enforcement of Contracts) Act 1954 (UK). The position in England today is that the second limb of s4 of the Statute of Frauds and s6 of Lord Tenterden's Act remain in force.
II. CANADA
4.3 The Law Reform Commission of British Columbia in its Repor on the Statute of Frauds3 published in 1977, considered an equivalent provision to s6 of Lord Tenterden's Act and stated:
Section 6 of the Statute of Frauds applies formal requirements of writing to representations as to credit. The section, it appears, was enacted to avoid the circumvention of the "guarantee and indemnity" provisions of the statute, and was not, as were the other sections of the statute, founded on a considered judgment as to the importance of writing per se.
Little can be said in support of the writing requirement in this context. In the first place, the mischief to which the section was directed no longer exists, and we believe that the courts of this province are perfectly qualified to distinguish between oral guarantees and oral representations as to credit; and are not prone to use the latter as a means of avoiding the difficulties resulting from the unenforceability of the former.
Secondly, oral representations may give rise to liability both in contract and in negligence, and we see little reason why protection should be afforded to those who make fraudulent representations as to credit.
Thirdly, situations which give rise to actions in deceit for oral misrepresentation as to credit are extremely rare, and there is little more than a handful of cases on point. It follows that section 6 does not serve to channel or regularize any form of common or accepted commercial practice - a function which may justify writing requirements in other contexts.
That section 6 is concerned with fraudulent behaviour is, we believe, the essential argument in favour of repeal. It is one thing to relieve a party from his contractual obligations if formalities of writing are absent, and even this aspect of formalities has given us some concern. It is altogether different to relieve a party from the consequences of his fraudulent acts, and we find it difficult, if not impossible, to support a statutory provision which has precisely that effect.4
The Commission recommended the repeal of the provision.
4.4 The Institute of Law Research and Reform in Alberta, in a Background Paper5 published in 1979 on the Statute of Frauds, discussed s6 of Lord Tenterden's Act and stated:
The apparent rationale for the enactment of the section was the fear that without such a requirement, plaintiffs who could not sue on guarantees because of a lack of writing, could circumvent section 4 of the Statute of Frauds by bringing an action in the tort of deceit.
Little can be said in favour of retaining this provision ...
Secondly, it is an unacceptable anomaly that oral negligent misrepresentations are actionable but oral fraudulent misrepresentations are not. A party should not be able to place himself in a better position by proving his own fraud.6
In its Report7 published in 1985 the Institute recommended the repeal of the provision.
III. UNITED STATES
4.5 The California Law Revision Commission in its Recommendation and Study relating to Representations as to the Credit of Third Persons and the Statute of Frauds,8 published in 1969, considered section 1974 of the Code of Civil Procedure of California, equivalent to s6 of Lord Tenterden's Act, and recommended the repeal of the section. In so doing the Commission stated:
The particular mischief at which the section is directed - circumvention of the suretyship provision of the Statute of Frauds - appears not to be a significant contemporary problem. Whatever may have been the case in 18th century England, courts are now adept at dealing with circumvention of the Statute of Frauds and can distinguish between an unenforceable suretyship promise and an actionable misrepresentation as to credit. In any event, it is not logically necessary or desirable to provide that, whenever a promise as to the undertaking of a third person made in writing, any fraudulent representation as to the credit of that third person must also be in writing. A promise is a promise, a fraud is a fraud, and the difference is significant.
Although the proposition cannot be demonstrated, one can reasonably assume that section 1974 has led to more litigation than it has prevented and has sheltered more fraud than it has suppressed.
Section 1974 is the only provision of the Statute of Frauds that applies to tort actions, and the tort to which it presumably is addressed (third-party deceit) is a rare and limited one. The section does not appear to routinize, regularize or authenticate any range of acceptable business or commercial practice. The decisions under the section have exonerated such miscellaneous persons as bankers, real estate brokers, subcontractors, lessees, and fathers of aspiring young businessmen. Insofar as there is a need to protect the maker of a casual representation as to the credit of another person, that is a prime concern of the law of deceit and of negligent misrepresentation.9
IV. QUEENSLAND
4.6 The Law Reform Commission of Queensland in its Report10 published in 1970 on the Statute of Frauds considered s13 of the Statute of Frauds and Limitations Act 1867 (Qld) which reproduced s6 of Lord Tenterden's Act and stated:
Section 13 imposes a requirement of writing as a prerequisite to an action upon any representation, assurance, etc., relating to the character, conduct, credit, ability, trade or dealings of a person, which is intended to enable that person to obtain credit, money or goods thereon. Judicial interpretation has limited the application of the section to representations which are fraudulent in character (see Banbury v Bank of Montreal (1918) AC 626; M L & C Assurance Company Limited v Evatt (1968) 42 ALJR 316, at pp325, 341), which has the surprising consequences that it may prove to be in the interest of a defendant to establish his own fraud and so escape liability in reliance upon the absence of the written memorandum required by section 13. Repeal of the section will thus remove this anomaly and also abolish a provision which experience has not shown to have produced an improvement in the law.11
In response the section was repealed by s3(2) of the Statute of Frauds 1972 (Qld).
V. SOUTH AUSTRALIA
4.7 The Law Reform Committee of South Australia in its Report Relating to the Repeal of the Statute of Frauds and Cognate Enactments in South Australia recommended the repeal of s4 (including the provision on guarantees) of the Statute of Frauds 167712 in its application to South Australia. Subsequently, it recommended major reforms in the law relating to suretyship in 1977 in a report on the reform of the law of suretyship.13 In 1980 the Commit tee published a report on inherited imperial statute law on practice and procedure,14 in which it considered Lord Tenterden's Act. The Committee recommended the repeal of the Act with the exception of s6. It stated:
The Committee did not discuss the operation of the section nor did it expand on its view that the section was "of importance in the law" and the report on suretyship to which the Committee refers did not deal with the question of representations as to credit.
FOOTNOTES
1. Law Revision Committee (England), Statute of Frauds and the Doctrine of Consideration (1937 Interim Report 6).
2. Law Reform Committee (England), First Report: Statute of Frauds and s4 of the Sale of Goods Act, 1893 (1953 Cmd 8809).
3. Law Reform Commission of British Columbia, Report on the Statute of Frauds (1977 LRC 33). The recommendations have been enacted in the Law Reform Amendment Act 1985 (BC).
4. Id at 61-62.
5. Institute of Law Research and Reform (Alberta), Statute of Frauds (1979 Background Paper No 12).
6. Id at 132-133.
7. Institute of Law Research and Reform (Alberta) The Statute of Frauds and Related Legislation (1983 Report 44) at 64.
8. California Law Revision Commission, Reports, Recommendations and Studies (1968-1969 Vol 9) at 701. The recommendations were enacted in 1970 Cal Stats ch 720.
9. Id at 707-708.
10. Queensland Law Reform Commission, Report on a Review of the Statute of Frauds (1970 QLRC 6).
11. Id at 5.
12. South Australia Law Reform Committee, Report Relating to the Repeal of the Statute of Frauds and cognate Enactments in South Australia (1975 Report 34) at 8. This recommendation was implemented by the enactment of the Statutes Amendment (Enforcement of Contracts) Act 1982 (SA) s3.
13. South Australia Law Reform Committee, Report Relating to the Reform of the Law of Suretyship (1977 Report 39).
14. South Australia Law Reform Committee, Report Relating to the Inherited Imperial Statute Law on Practice and Procedure in this State (1980 Report 55).
15. Id at 26-27.
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