SPH Circulation Saga: Misrepresentation

On Jan 9, it was reported that SPH media inflated its daily circulation figures by 10 to 12% of its reported daily average circulation figures. If an advertiser were to take umbrage at the inflated figures, what recourse could they possibly have?

   SPH Media CEO Teo Lay Lim told advertisers in an email that circulation data was not used for the basis of advertising packages.    

If we were to take her word as truth, it would seem that advertisers were not overcharged and they paid a fair rate for their advertisements to be run. However, it does not address the fact that the falsified circulation data might have induced the advertisers to enter into a contract with SPH Media. Circulation data is definitely material when considering whether to advertise. English contract law is based on the principle of caveat emptor. A reasonable person would be expected to perform due diligence, very likely relying upon circulation data as one of the factors to consider whether to enter into contract with SPH Media.

SPH Media had fudged the numbers through various means which included:

1. counting lapsed contracts in circulation data
2. including copies that were printed, counted for circulation, and then destroyed
3. multiple instances of double-counting subscriptions
4. injecting a project account with additional funding to purchase fictitious circulation

Items 1, 2 and 3 can probably be argued to be innocent misrepresentation. Relying on outdated data, confusion or mistakes made can explain the discrepancy. However, item 4 is the smoking gun here. There was deliberate effort taken to inject additional funding to fudge the numbers. There is no way that SPH Media was unaware given that funding had to be specifically requested and approved for this purpose. This probably fulfills the heavy burden of proof to be considered fraudulent misrepresentation.

   According to SPH's former Chief Marketing Officer, Elsie Chua, the marketing department does not guarantee circulation in contract with advertisers.    

I would argue that this is an exclusion clause, where SPH Media is trying to exclude itself from the liability of providing inaccurate circulation data. Based on the language, it would seem that circulation data did not make it into the terms of the contract and it is a mere representation made during the contract negotiations. It is interesting here to note that in HIH Casualty and General Insurance Ltd v Chase Manhattan Bank [2003], the House of Lords held that exclusion clauses could apply only to negligent misrepresentation and not fraudulent misrepresentation. Hence, I don't think that statement holds any water.

Lastly, on the topic of remedies, rescission is out of the question. If the advertisement has already run, it is impossible to collect back all the newspapers, remove the advertisement and circulate them once again. Hence, the only remedy is compensation. In general, the calculation for damages aims to put the advertiser in the position it would have been if the misrepresentation did not occur. Therefore, the compensation may be in the region of about 10 to 12% of the amount the advertiser spent.