[COURT OF APPEAL]

HORNAL v. NEUBERGER PRODUCTS LTD.

[Plaint No. O. 663.]

Burden of Proof - Standard of proof - Civil action - Allegation of fraud - Balance of probability.

Fraud.

In a civil action where fraud or other matter which is or may be a crime is alleged against a party or against persons not parties to the action, the standard of proof to be applied is that applicable in civil actions generally, namely, proof on the balance of probability, and not the higher standard of proof beyond all reasonable doubt required in criminal matters; but there is no absolute standard of proof, and no great gulf between proof in criminal and civil matters; for in all cases the degree of probability must be commensurate with the occasion and proportionate to the subject-matter. The elements of gravity of an issue are part of the range of circumstances which have to be weighed when deciding as to the balance of probabilities.

The plaintiff in an action for damages for breach of warranty or, alternatively, for fraudulent misrepresentation, alleged that the director of the defendant company had in the course of negotiations for the purchase of a used capstan lathe stated that it had been reconditioned by a reputable firm of toolmakers. The defendants denied that the statement had been made. If it had been made the director must have known it to be untrue.

The county court judge found that the statement had been made, but held on the claim for breach of warranty that it had not been made contractually. On the claim based on fraud he said that he was satisfied on the balance of probability that the statement had been made, and that that was the correct standard to apply; but that he would not have been so satisfied if the criminal standard of proof was to be applied. He gave judgment for the defendants on the ground that the plaintiff had not shown that he had suffered damage by relying on the fraudulent misrepresentation; but he ordered that the plaintiff should pay only one-fourth of the defendants' costs. On appeal by the plaintiff and cross-appeal by the defendants:-

Held, that the judge had applied the correct standard of proof but that on the facts the plaintiff had suffered damage and was entitled to Judgment.

Dicta of Lord Sumner in Lek v. Mathews (1927) 29 Ll.L.Rep. 141, 164, and of Denning L.J. in Bater v. Bater [1951] P. 35, 36-37; 66 T.L.R. (Pt. 2) 589; [1950] 2 All E.R. 458 applied.

Thurtell v. Beaumont (1823) 1 Bing. 339 disapproved.

Preston-Jones v. Preston-Jones [1951] A.C. 391; [1951] 1 T.L.R. 8; [1951] 1 All E.R. 124 distinguished.

APPEAL from Judge H. C. Leon, sitting at Willesden County Court.

The plaintiff, Jimmie William Frederick Hornal, a precision engineer, wanted a Herbert No. 4 capstan lathe for the purpose of carrying out certain contracts for work. He heard that the defendants, Neuberger Products Ltd., had such a lathe for sale and went to inspect it at their premises, where he saw it in operation and talked to the director and chief shareholder of the defendant company, Mr. Neuberger. At the interview there were present an engineer named Lynch employed By the plaintiff and some of the defendants' employees. They inspected the Herbert No. 4 lathe, discussed it, and after some bargaining about the price, the plaintiff agreed to take it. He signed a purchase order dated October 13, 1954, but the transaction was eventually completed on hire-purchase terms, Neuberger Products Ltd. selling the machine for £415 to United Dominion Trust Ltd., who in turn let it on hire-purchase terms to the plaintiff.

The history of the machine was as follows: The lathe was manufactured by Alfred Herbert Ltd. in January, 1935, for the continental market. It was shipped to Germany in May, 1935. It was used in Germany for many years until in 1951 Mr. Neuberger, on behalf of Neuberger Products Ltd., bought it in Germany from its German owner for about £700. The German owner told him that it had been factory-reconditioned at their works in Germany, and Mr. Neuberger believed him. But nevertheless, when Mr. Neuberger imported the machine into England, in order to obtain it free of duty, he said it had not been reconditioned. He made a declaration that: "We hereby declare these goods free of duty as British returned goods, which have not undergone any process of renovation, repair, manufacture, alteration or addition while abroad." Mr. Neuberger made that declaration regardless of the truth, but, as it suited him to make it, he did so. In 1952 the machine was imported free of duty. The transport arrangements were made by the well-known toolmakers Soag Machine Tools Ltd.: and while it was in their hands they put a metal plate with the name "Soag Machine Tools" on it. They did it as an advertisement but not meaning to indicate that they had done any work on it. Neuberger Products Ltd. paid some £700 for the machine and took delivery. Mr. Neuberger soon found out that it had not been reconditioned at all. He was very angry about it and managed to persuade the German seller to refund him £300. He then himself did the work necessary to put the machine in good and sound working order. He had a new bar feed put in and the gears put right; but it did not cost him nearly as much as £300.

After the plaintiff had taken delivery of the machine he discovered that a part of it - the turret - was defective; and in order to remedy it he had another turret fitted by the original manufacturers, Alfred Herbert Ltd., at a cost of £50 14s. 3d. That replacement took some seven weeks, during which the plaintiff was unable to use the lathe and suffered damage in consequence.

He thereupon brought an action against the defendants claiming damages for breach of warranty and further or alternatively damages for fraud. In support of that claim he relied on several representations alleged to have been made to him by Mr. Neuberger when he inspected the machine, and in particular alleged that Mr. Neuberger had said to him: "The machine has been Soag reconditioned"; and he claimed that that was a contractual warranty or, alternatively, a fraudulent misrepresentation. The defendant company, by Mr. Neuberger, denied that he had spoken those words.

The hearing in the county court extended over 12 sittings and included four days of legal submissions. Judge Leon, who had invited the parties at an early stage to reach a settlement, gave judgment on June 6, 1956, in favour of the defendants; but his order as to costs required the plaintiff to pay only one-fourth of the defendants' costs. His findings and the reasons for his decision were as follows:-

He found that in the course of the discussion Mr. Neuberger did in fact say that the machine had been Soag reconditioned, but that he did not say anything else which amounted to a representation or a statement as to the immediate availability of the machine for work. In the judge's view both parties thought that the machine was fit for immediate use, though that had not been expressly stated.

Having said that he thought that the statement as to Soag reconditioning had been made, the judge considered the position in regard to the claim for breach of warranty, and said: "Had I been satisfied that when Mr. Neuberger made that statement he intended to be bound by it contractually ... and that the plaintiff so understood the statement, I should have had little difficulty in coming to the conclusion that the statement was made contractually. ... But so far from deciding that the plaintiff has discharged the onus of proof on a preponderance of probability, I am satisfied that it was nothing of the sort; this was a discussion between these two gentlemen; ... and I have no hesitation in holding that the plaintiff has failed to

prove that the defendants gave any warranty to him about the machine at all, and so I hold."

The judge then turned to consider the plaintiff's claim for fraudulent misrepresentation, based as it was on the same allegations as the claim for breach of warranty. The judge said that though the plaintiff and his witness Lynch were not very satisfactory witnesses, Mr. Neuberger was a man who was quite prepared to tell a lie if he thought that it was to his advantage, for he had told a deliberate lie to the customs authorities when he brought the machine in question from Germany to England. He continued: "I now have to consider whether the plaintiff has proved his case, and in order to do that I have to come to a conclusion on the very difficult question as to whether the proof required of him is no more than what has already satisfied me, that a certain statement was made, or whether the case has to be proved beyond all reasonable doubt. If I have to be satisfied beyond all reasonable doubt I say at once that I should not be so satisfied in regard to the statement that it was Soag reconditioned. I have come to the conclusion on the preponderance of probability that that statement was made; but in my view no jury would dream of convicting a defendant of a fraud based on that statement, and if I had to consider whether sitting as magistrates trying a case of false pretences I should convict Mr. Neuberger, I have no hesitation whatever in saying that I should not dream of doing so. But this case has not been proved by criminal standards at all."

The judge then added that Mr. Neuberger had made the statement to persuade the plaintiff to enter into the transaction and that to some extent the plaintiff had relied on the statement. But in order to succeed in an action for fraud it was not enough to show that a contract hud been induced by a fraudulent misrepresentation unless some damage were shown by the plaintiff. On the evidence, the judge said, he found that this machine was worth quite as much as, and very likely more than, the plaintiff had paid for it, and accordingly could not see that the plaintiff had suffered any damage as a result of the misrepresentation. For that reason there must be judgment for the defendants.

The judge then considered in detail the question of the measure of proof in civil cases where fraud was alleged, though, as he stated, it would affect only the question of costs. On a review of the authorities the judge accepted that in Thurtell v.

Beaumont¹ - an insurance case where arson was alleged - the judge had directed the jury that they must be satisfied that the crime imputed to the plaintiff was as fully proved as would justify their finding him guilty on a criminal charge for the same offence; and that that direction was held to be right; but he pointed out that in those days neither a plaintiff nor a defendant could give evidence; and having considered many other cases, including other insurance cases where judges of great authority had stated that the court must be satisfied "beyond all reasonable doubt," the "third party cases" where to establish a claim in a civil action it was necessary to prove a fraud or crime by a third party, the measure of proof in divorce cases, and in particular the judgment of Denning L.J. in Bater v. Bater,² the judge concluded that the standard of proof required in the present case was simply that the judge or jury must be satisfied on the preponderance of probability that the facts necessary to establish the cause of action had been proved, and that the only authority which would compel him to apply the higher standard of proof beyond all reasonable doubt was Thurtell v. Beaumont³; and inasmuch as that had been decided when neither plaintiff nor defendant could give evidence, and, moreover, was inconsistent with many later decisions, he was entitled to follow the later decisions. Accordingly, as he was satisfied on a preponderance of probability that Mr. Neuberger in fact made the statement alleged, that the machine was Soag reconditioned, it would be a representation for which the defendants would be liable if the plaintiff had been able to prove damage. But in default of proving damage, the plaintiff's claim must fail. The judge then made the order as to costs stated above.

The plaintiff appealed on the ground that the judge had misdirected himself in holding that there had been no damage. The defendants cross-appealed on the order as to costs.

Ralph B. Gibson for the plaintiff. First, the judge, in holding that the statement "Soag reconditioned" was not a warranty, erred in that he took into account the plaintiff's subjective state of mind, contrary to the decision in Couchman v. Hill,⁴ followed in Harling v. Eddy.⁵ [Routledge v. McKay⁶ was also referred

1 (1823) 1 Bing. 339.

2 [1951] P. 35, 36-37; 66 T.L.R. (Pt. 2) 589; [1950] 2 All E.R. 458.

3 1 Bing. 339.

4 [1947] K.B, 554; 63 T.L.R. 81; [1947] 1 All E.R. 103.

5 [1951] 2 K.B. 739, 741; [1951] 2 T.L.R. 245, [1951] 2 All E.R. 212.

6 [1954] 1 W.L.R. 615, [1954] 1 All E.R. 855.

to.] Secondly, the judge having found that damage was suffered, it was not open to him to hold that no damage in the general sense had been suffered because the plaintiff got a machine worth as much as, if not more than, he had paid for it. Where there has been a fraudulent misrepresentation, it is sufficient for the plaintiff to show that damage flowed from the action taken in reliance on the misrepresentation; it is not necessary to show that damage flowed from the misrepresentation itself. [Peek v. Derry⁷ was referred to.]

[DENNING L.J. In Peek v. Derry⁷ the shares were of no value; but what impressed the judge here is that the plaintiff got his money's worth.]

Only in the capital value of the machine, and not in its use; and because he could not use it immediately he suffered loss. Moreover, it is probable that he paid more for it as "Soag reconditioned" than he would have done if it were not. It does not lie in the mouth of a person who makes a fraudulent statement to say that the other party did not rely on it. The measure of damage to be applied here is that formulated by Slesser L.J. in London County Freehold and Leasehold Properties Ltd. v. Berkeley Property and Investment Co. Ltd.,⁸ namely, the difference between what the plaintiff paid for this machine and what he would have paid but for the fraudulent statement. The measure of damage as formulated by Collins M.R. in McConnel v. Wright⁹ [namely, that in so far as the plaintiff had got an equivalent for the money lost, the loss he could claim as damages was diminished] was not intended to be the general measure of damages applicable in all cases of fraud. Mullett v. Mason¹⁰ is also relied on.

Samuel Stamler for the defendants. On the claim for breach of warranty the judge did not regard the plaintiff's subjective state of mind as decisive. He correctly applied well-established principles of law in holding that the statement was not made contractually and that the plaintiff knew that it was not so made; that is a finding of fact which should not be disturbed.

Though it is conceded that, if damage is suffered as the result of an intrinsic defect in an article which the plaintiff was induced to buy by reason of a fraudulent misrepresentation, the person who made the misrepresentation is liable in tort for that damage,

7 (1887) 37 Ch.D. 541, 565, 577; 4 T.L.R. 84.

8 [1936] 2 All E.R. 1039, 1047-1048.

9 [1903] 1 Ch. 546, 553-555.

10 (1866) L.R. 1 C.P. 559.

the defect in the turret holes here was not an intrinsic defect but an obvious defect, and the damage suffered by lost time in getting it put right is too remote; it cannot be said to flow from the misrepresentation or from action taken in reliance on it. The measure of damage adopted in the London County Freehold and Leasehold case¹¹ is wholly inappropriate here; there the subject-matter of sale was a unique property believed to be worth £611,000; here the lathe has an easily ascertainable market value, and the measure of damage is the usual one, the difference between what the plaintiff paid and the market value of the machine on that date. [Waddell v. Blockey¹² was also relied on.]

On the defendants' cross-appeal the issue for decision is the true standard of proof to be applied in a civil action where fraud is alleged. The burden was on the plaintiff to satisfy the judge that the statement was made, and the judge has said that he was satisfied and at the same time had a reasonable doubt; that is what Bucknill L.J. described in Bater v. Bater¹³ as "an impossible state of mind."

The authorities show that the higher standard of proof beyond reasonable doubt applicable in criminal cases applies in civil courts only where there is either a specific charge of crime or a specific charge of fraud which for this purpose has been assimilated to crime. The cases fall into four main groups: (1) Cases where there was a specific charge of crime: Thurtell v. Beaumont¹⁴ and Herbert v. Poland¹⁵ - two insurance cases where there were allegations of arson against the plaintiff, in both of which the higher standard of proof beyond all reasonable doubt was applied; and two actions for libel where the defence pleaded justification and alleged a crime - Chalmers v. Shackell¹⁶ and Willmett v. Harmer¹⁷ - in both of which the jury were directed to decide as on indictment for the offence alleged in the justification. (2) Matrimonial proceedings; and in these the House of Lords has now laid down, in Preston-Jones v. Preston-Jones,¹⁸ that the word "satisfied" in the Matrimonial Causes Act, 1950, imports proof beyond reasonable doubt; Lord MacDermott¹⁹ said that that standard was required because of the gravity and public importance of the issues involved. (3) The "third party" cases, namely, those where an allegation of crime is made not against a party

11 [1936] 2 All E.R. 1039.

12 (1879) 4 Q.B.D. 678.

13 [1951] P. 35, 36; 66 T.L.R. (Pt. 2) 589; [1950] 2 All E.R. 458.

14 (1823) 1 Bing. 339.

15 (1932) 44 Ll.L.Rep. 139.

16 (1834) 6 C. & P. 475.

17 (1839) 8 C. & P. 695.

18 [1951] A.C. 391; [1951] 1 T.L.R. 8; [1951] 1 All E.R. 124.

19 [1951] A.C. 391, 417.

to the proceedings but against some third party: Vaughton v. London and North Western Railway Co.,²⁰ Boyce v. Chapman and Brown²¹ and Hurst v. Evans.²² In those cases the lower civil standard was applied. That is plainly inconsistent with the decisions in group (1) (supra); for though in Vaughton's case²³ and in Boyce v. Chapman and Brown²⁴ the justification for applying the civil standard of balance of probability might be that there was only a general allegation of crime against persons unnamed, in Hurst v. Evans²⁵ the third party against whom a specific crime was alleged was a named person.

[MORRIS L.J. Surely in the third party cases the standard ought to be higher, for the person against whom the crime is alleged is not there to defend himself. If the proceedings are reported he may be condemned in the eyes of the world.]

[HODSON L.J. That applies in all cases. One cannot get a logical result from a consideration of these authorities. The first group must have been wrongly decided.]

It is clear that, though there is no moral justification for it, the courts have drawn a distinction in cases where the fraud or crime alleged is that of a third party, and have not required the higher standard to be applied. (4) The residuary group of cases, in which a charge of fraud or fraudulent statement has been made in the course of civil proceedings. Although the pronouncements relied on in these cases are admittedly only dicta, it is submitted that one of them - Elfie A. Issaias v. Marine Insurance Co. Ltd.²⁶ - is binding on this court, for the submissions of eminent leading counsel - Lord Halsbury K.C. and Mr. R. A. Wright K.C. (later Lord Wright) - show that the specific point as to the standard of proof was raised, and the Court of Appeal, discharging the plaintiff from the finding of "guilty" by Bailhache J., adopted the higher standard of proof beyond all reasonable doubt. In that case it was alleged that a shipowner in an insurance claim had connived in the scuttling of his ship.

[DENNING L.J. A case of scuttling is like the cases alleging arson; the charge ought to be proved beyond reasonable doubt because it is so grave.]

Scuttling a ship is not a crime unless it is one of Her Majesty's ships or there is an attempt to defraud underwriters. Though

20 (1874) L.R. 9 Ex. 93.

21 (1835) 2 Bing.N.C. 222.

22 [1917] 1 K.B. 352; 33 T.L.R. 96.

23 L.R. 9 Ex. 93.

24 2 Bing.N.C. 222.

25 [1917] 1 K.B. 352.

26 (1922) 13 Ll.L.Rep. 381; (1923) 14 Ll.L.Rep. 1, 395, 464 et seq.; (1923) 15 Ll.L.Rep. 186 (C.A.).

it is conceded that in Lek v. Mathews²⁷ Lord Sumner's speech²⁸ appears to support the adoption of the lower standard of balance of probability and is to that extent inconsistent with the Issaias case,²⁹ the point as to standard of proof does not appear to have been argued in Lek v. Mathews,³⁰ and the dictum of one of their Lordships in the House of Lords cannot overrule the decision of all the members of the Court of Appeal after argument on that specific point in the Issaias case.³¹ [Demetriades & Co. v. Northern Assurance Co.³² was also referred to.] Devlin J. in Armstrong v. Strain³³ also appeared to indicate that where fraud is alleged the higher standard applies. The court is not asked to lay down broad general principles covering standards of proof in every possible type of civil action, but only to say that on the authorities as they stand proof beyond a reasonable doubt, whether qualified by considering it a criminal standard or not. is required where a charge is made either of a specific crime or of fraud.

[DENNING L.J. If that is correct, and a statement is made which is both a warranty and a fraud, the court would be driven to saying that the warranty was to be decided on the lower and the fraud on the higher standard. That would be bringing the law into contempt.]

If the plea is both in warranty and fraud the higher standard must be applied. [Cooper v. Slade³⁴ was cited for the earliest use, per Willes J., of the words "preponderance of probability"; and Miller v. Minister of Pensions, per Denning L.J.,³⁵ that "proof beyond reasonable doubt" did not mean "beyond a shadow of doubt."]

Gibson in reply. Though the Issaias case³⁶ is claimed as a clear decision of an appellate court on the proper standard of proof when considered as an abstract code of law, Lek v. Mathews³⁷ is equally authoritative. The so-called authorities are not so cogent as they would be if this particular point had been argued. The correct statement of the law is that of Denning L.J. in Bater v. Bater,³⁸ namely, that the degrees of probability must be commensurate with the subject-matter. Thurtell v. Beaumont³⁹ is

27 (1927) 29 Ll.L.Rep. 141.

28 Ibid. 164.

29 15 Ll.L.Rep. 186.

30 29 Ll.L.Rep. 141.

31 15 Ll.L.Rep. 186.

32 (1923) 17 Ll.L.Rep. 327 (H.L.).

33 [1951] 1 T.L.R. 856, 861 (K.B.); [1952] 1 K.B. 232; [1952] 1 T.L.R. 82; [1952] 1 All E.R. 139 (C.A.).

34 (1858) 6 H.L.C. 746, 772.

35 [1947] W.N. 241; 63 T.L.R. 474; [1947] 2 All E.R. 372.

36 15 Ll.L.Rep. 186.

37 29 Ll.L.Rep. 141.

38 [1951] P. 35, 36-37.

39 1 Bing. 339.

not a continuing authority, and that which the county court judge in the present case said about the position of the parties at that date is adopted here. Herbert v. Poland⁴⁰ was wrongly decided and is inconsistent with Hurst v. Evans.⁴¹

[DENNING L.J. Unless the point is particularly argued most people would say that where there is a serious allegation such as arson there must be a very high degree of proof: see per Lord Goddard C.J. in Regina v. Hepworth and Fearnley⁴² on the difficulty of understanding how there can be two standards.]

The county court judge did not misdirect himself on the standard of proof; he said that he must be satisfied on balance of probability having regard to the nature of the allegation, and that in a civil action one does not require that particular degree of certainty required by the criminal law, because in a civil action the court is not handing out retribution but balancing the rights of the parties. It is not possible to find one principle covering all the cases; but where the criminal test has been applied it indicates the attitude of the court in approaching such problems as arose in the insurance and in the libel cases. The judge's finding, that the statement was made should not be disturbed.

Nov. 20. DENNING L.J. The question in this case is whether Mr. Neuberger orally represented to the plaintiff that a certain capstan lathe had been "Soag reconditioned." I should have thought it was a simple question of fact for the judge to decide on the evidence, but it has become so mixed up with questions of law that the case took many days in the court below and over two days before us. To make the position clear I must give the history of the machine. [His Lordship stated the facts as set out above, and continued:] The judge seems to have found it difficult to make up his mind whether Mr. Neuberger made that representation [that it was Soag reconditioned] or not. The judge said that his decision depended on the standard of proof which was to apply. If he was to apply the standard in civil cases - the balance of probability - he would hold that the representation was made by Mr. Neuberger: but if he was to apply the standard in criminal cases - proof beyond reasonable doubt - he would hold that the representation was not made.

40 44 Ll.L.Rep. 139.

41 [1917] 1 K.B. 352.

42 [1955] 2 Q.B. 600, 603, [1955] 2 All E.R. 918.

Such being the judge's state of mind, he considered first whether there was a contractual warranty. On that issue the civil standard of proof clearly applied. He found on the balance of probabilities that Mr. Neuberger did say that the machine had been Soag reconditioned, that Mr. Neuberger made it in order to persuade Mr. Hornal to enter into the transaction, and that Mr. Hornal relied upon it: but he found that it was not a contractual warranty because it was not so intended. I do not think we can disturb that finding. The judge clearly had in mind the speech of Lord Moulton in Heilbut, Symons & Co. v. Buckleton¹ and directed himself by it. It was said that the judge made a mistake in that he tried to look into the minds of the parties to see if in their inmost thoughts they intended a warranty: whereas he ought only to have looked at their external behaviour to see whether it bore the reasonable inference of a warranty. Now I quite agree that if the judge did try to look into their inmost thoughts it would be a mistake. In seeing whether there is a contract or not, the law can only look to outward appearances. If an intelligent bystander would reasonably infer that a warranty was intended that will suffice, even though neither party in fact had it in mind. This is such trite law that I do not think for a moment the judge fell into error about it. It is true that in one passage he used words which seem to suggest that he was looking into the minds of the parties: but in another passage he approached the matter in the correct way. He said that one of the matters that impressed him most was the plaintiff's complete failure to refer in any document to this machine being Soag reconditioned. That is a factor always considered in these cases. Thus having disposed of the warranty the judge turned to consider whether Mr. Neuberger was guilty of fraud. If Mr. Neuberger did in fact represent that the machine had been Soag reconditioned, he was clearly guilty of fraudulent misrepresentation, because he knew it was not true. He had got £300 from his German supplier because it had not been reconditioned. So the only question was whether Mr. Neuberger made the representation or not. It was there that the judge ran into difficulty - about the standard of proof. He said: "If I have to be satisfied beyond all reasonable doubt, I should not be so satisfied in regard to the statement that it was Soag reconditioned. I have come to the conclusion on the preponderance of probability that the statement was made, but in my view no jury would dream of convicting a defendant of a fraud based on that statement,

1 [1913] A.C. 30.

and if I had to consider whether, sitting as a magistrate trying a case of false pretences, I should convict Mr. Neuberger of making this statement, I have no hesitation in saving I should not dream of doing so."

In setting himself this problem the judge showed an uncommon nicety of approach. I must say that, if I was sitting as a judge alone, and I was satisfied that the statement was made, that would be enough for me, whether the claim was put in warranty or on fraud. I think it would bring the law into contempt if a judge were to say that on the issue of warranty he finds the statement was made, and that on the issue of fraud he finds it was not made.

Nevertheless, the judge having set the problem to himself, he answered it, I think, correctly. He reviewed all the cases and held rightly that the standard of proof depends on the nature of the issue. The more serious the allegation the higher the degree of probability that is required: but it need not, in a civil case. reach the very high standard required by the criminal law. Take this very case. If Mr. Neuberger did represent that the machine was Soag reconditioned he did very wrong because he knew it was untrue. His moral guilt is just as great whatever the form of the action, no matter whether in warranty or in fraud. He should be judged by the same standard in either case.

I have already expressed my views on this subject in Bater v. Bater² and I need not repeat them here. I would only mention the insurance cases on which Mr. Stamler especially relied, in which the insured person tried to defraud the insurance company by burning down his house or scuttling his ship. In some of those cases, particularly Thurtell v. Beaumont³ and Issaias v. Marine Insurance Co. Ltd.,⁴ the judges have said that the offence of arson or malicious damage must be as fully proved as a criminal charge: but the latest case in the House of Lords, Lek v. Mathews,⁵ shows that that is putting too high a burden on the insurance company. Lord Sumner said that⁶ "on a civil issue I do not think more is required than a correct appreciation of the incidence and the shifting of the onus of proof and a reasonable estimate of the weight pro and con of the various parts of the evidence. ... I am just as reluctant to make the underwriters pay Mr. Lek many thousands of pounds, if he has been guilty of making a false claim, as to find him guilty

2 [1951] P. 35, 36.

3 (1823) 1 Bing. 339.

4 (1923) 15 Ll.L.Rep. 186.

5 (1927) 29 Ll.L.Rep. 141.

6 Ibid. 164.

of it if he has not. The whole question is whether it has been proved; and I think it has." It is apparent that Lord Sumner considered that proof was only necessary according to the civil standard.

It is unnecessary to discuss here the difference between the criminal standard and the civil standard. I tried to define it in Miller v. Minister of Pensions.⁷ Suffice it to say that the judge, applying the civil standard, found that Mr. Neuberger represented that the machine had been Soag reconditioned, and I do not think that this finding should be disturbed. It can readily be reconciled with his finding that there re was no contractual warranty. Suppose that Mr. Neuberger used some such words as these: "It has, I believe, been Soag reconditioned. At least when I bought it I was told it had been told." There would then be no contractual warranty because Mr. Neuberger was only passing on what he had been told, as happened in Routledge v. McKay⁸ and the recent decision of Oscar Chess Ltd. v. Williams⁹: but the would be a fraudulent misrepresentation because the statement conveyed the false impression that it had been Soag reconditioned, whereas Mr. Neuberger knew it had not.

There remains, however, one more question. Despite his findings that the representation was made the judge dismissed the plaintiff's claim for fraud, because he said he had suffered no damage. He said that the machine was worth quite as much as the £400 the plaintiff paid for it, and very likely more, and that therefore the plaintiff could not recover. I do not agree. The judge had already found that the representation was made in order to persuade the plaintiff to buy the machine, and that the plaintiff did to some extent rely on it. It influenced his mind. I ask myself: how did it influence him? We do not know exactly, but we do know he got the impression that the machine was fit for immediate use. The representation that it had been Soag reconditioned would certainly have helped to produce that impression. He took the machine in the belief that it was fit for immediate use, whereas it was not: and he was put to seven weeks' delay in getting it put right. That is, I think, a head of damage which can properly be said to flow from this fraudulent misrepresentation. The judge put it at some £20 to £30.

Another way of approaching the case is to ask: what would have been the position if the statement had not been made? We

7 (1947) 63 T.L.R. 474.

8 [1954] 1 W.L.R. 615; [1954] 1 All E.R. 855.

9 Judgments of the Court of Appeal 1956, No. 302.

do not know. The plaintiff might have offered less, and got the machine for less than it was worth; or he might not have gone on with the transaction at all, but bought another machine elsewhere, and thus saved himself the seven weeks' delay in getting this one put right. In either case he would have suffered damage. I confess that I do not look kindly on a defendant who, having got the plaintiff to buy a machine by knowingly telling him an untruth, afterwards says he suffered no damage. Why say it except to induce him to buy or to pay a higher price than he otherwise would? In either case he suffers damage. The damage may be difficult to assess. It may only be £20 to £30. But that there was some damage sufficient to support the action, I do not doubt.

This means that Mr. Neuberger was guilty of fraud. The appeal should be allowed and judgment entered for damages to be assessed, but I do hope that they can be agreed: and the cross-appeal should be dismissed.

HODSON L.J. The county court judge, having reached the conclusion, on the basis of a balance of probability, that a fraudulent statement had been made, found himself unable to find that fraud had been proved beyond all reasonable doubt. Thus he posed himself the question: "In a civil action are criminal standards of proof necessary in considering what is or may be a crime?" This question, after a review of the authorities, he answered in the negative.

The comparative dearth of express authority on this topic is not surprising. No responsible counsel undertakes to prove a serious accusation without admitting that cogent evidence is required, and judges approach serious accusations in the same way without necessarily considering in every case whether or not there is a criminal issue involved. For example, in the ordinary case arising from a collision between two motor-cars involving charges of negligence, I have never heard of a judge applying the criminal standard of proof, on the ground that his judgment might involve the finding of one of the parties guilty of a criminal offence.

The judge took great pains to consider the cases in which the question he posed had been considered. I do not propose to follow him in their review, agreeing as I do with his conclusion. I agree with him that in most civil cases, where the standard of proof in cases involving crime has been mentioned, there has been no argument, and the heavier burden of proof has been

accepted by counsel or assumed as necessary by the judge. I also think that it is impossible to find a satisfactory explanation of all cases where divergent views have been taken. For example, it seems to have been taken for granted in what may be called the third party cases that the crime of a person not concerned in the action may be established on a balance of probabilities: see, for example, Boyce v. Chapman and Brown¹⁰ and Vaughton v. London and North Western Railway Co.¹¹ If the criminal standard were required in civil cases for the reason suggested in Taylor on Evidence (12th ed., vol. 1, at p. 106), namely, that every man has a right to his character and not to have the presumption of innocence rebutted unless the strict standard were adopted, the third party cases would appear to be cases where the rule ought to be most strictly applied, since the third party may not even know of the charge which is being made against him in an action between two persons in whose dispute he is not interested, and even if he knows of it may have no opportunity of intervening in it.

Notwithstanding the existence of some cases where the point appears to have been argued and decided in a contrary sense, I think the true view, and that most strongly supported by authority, is that which the judge took, namely, that in a civil case the balance of probability standard is correct. I propose to refer only to a few of the authorities.

The first is Cooper v. Slade.¹² The action was for penalties for bribery under the Corrupt Practices Prevention Act, 1854, which declared the giving or promising of bribes to voters to be a misdemeanor. Willes J., one of the judges who was summoned to give his opinion to the House, in the course of his speech said¹³: "As a difference of opinion exists upon this question, I may be excused for referring to an authority in support of the elementary proposition that in civil cases the preponderance of probability may constitute sufficient ground for a verdict. I find such an authority referred to in Mr. Best's very able and instructive treatise on the Principles of Evidence (2nd ed., p. 114). So long since as the 14th Eliz., Dyer C.J. and a majority of the other Justices of the Common Pleas laid down this distinction between pleadings and evidence, 'that in a writ or declaration or other pleading certainty ought to be shown, for there the party must answer to it, and the court must adjudge upon it; and that which the party shall be

10 (1835) 2 Bing.N.C. 222.

11 (1874) L.R. 9 Ex. 93.

12 (1858) 6 H.L.C. 746.

13 Ibid. 772.

compelled to answer to, and which is the foundation whereupon the court is to give judgment, ought to be certain, or else the party would be driven to answer to what he does not know, and the court to give judgment upon that which is utterly uncertain. But where the matter is gone so far that the parties are at issue, or that the inquest is awarded by default, so that the jury is to give a verdict one way or the other, there, if the matter is doubtful, they may found their verdict upon that which appears the most probable, and by the same reason that which is most probable shall be good evidence."

In more recent times there is the speech of Lord Sumner in Lek v. Mathews,¹⁴ where he said: "With great respect to the Lords Justices it seems to me that what has really made both this forgery theory and this construction of the claim attractive has been a strong reluctance to say that Mr. Lek has tried to cheat and has backed his effort by perjury. This has been supported by a canon, new to me in the form employed, to the effect that such a man as Mr. Lek cannot be convicted of this so long as any reasonable possibility remains of explaining his conduct otherwise. I am afraid I look at it differently and think that this is wholly without authority. When prisoners could not give evidence, such an appeal might have passed muster with a jury, but on a civil issue I do not think more is required than a correct appreciation of the incidence and the shifting of the onus of proof and a reasonable estimate of the weight pro and con of the various parts of the evidence. Mr. Lek's wealth and reputation are material only as ground for considering the probability of such misconduct. The consequences of a verdict against him are quite immaterial. I am just as reluctant to make the underwriters pay Mr. Lek many thousands of pounds, if he has been guilty of making a false claim, as to find him guilty of it if he has not. The whole question is whether it has been proved; and I think it has." There is in truth no great gulf fixed between balance of probability and proof beyond reasonable doubt. Although when there is a criminal prosecution the latter standard is securely fixed in our law, yet the measure of probability is still involved in the question of proof beyond reasonable doubt.

Students are familiar with Professor Kenny's Outlines of Criminal Law (16th ed. (1952)), where the following passage appears at p. 416: "A larger minimum of proof is necessary to

14 29 Ll.L.Rep. 141, 164.

support an accusation of crime than will suffice when the charge is only of a civil nature. For in the latter it is sufficient that there be a preponderance of evidence in favour of the successful party, whereas in criminal cases the burden rests upon the prosecution to prove that the accused is guilty 'beyond reasonable doubt.' When therefore the case for the prosecution is closed after sufficient evidence has been adduced to necessitate an answer from the defence, the defence need do no more than show that there is a reasonable doubt as to the guilt of the accused. See Rex v. Stoddart.¹⁵ Even in civil proceedings, e.g. in actions of debt, a mere scintilla of evidence would not warrant the jury in finding a verdict for the plaintiff; for there must (as we have seen) be so much evidence that a reasonable man might accept it as establishing the issue. But in criminal cases the presumption of innocence is still stronger, and accordingly a still higher minimum of evidence is required; and the more heinous the crime the higher will be this minimum of necessary proof. The progressive increase in the difficulty of proof, as the gravity of the accusation to be proved increases, is vividly illustrated in an extract from Lord Brougham's speech in defence of Queen Caroline¹⁶: 'The evidence before us,' he said, 'is inadequate even to prove a debt impotent to deprive of a civil right - ridiculous for convicting of the pettiest offence scandalous if brought forward to support a charge of any grave character monstrous if to ruin the honour of an English Queen.'" This passage appears in the earlier editions of this work for which the late Professor Kenny was responsible.

Denning L.J. referred both to criminal and civil cases when he expressed the same idea in Bater v. Bater¹⁷: "The difference of opinion which has been evoked about the standard of proof in recent cases may well turn out to be more a matter of words than anything else. It is of course true that by our law a higher standard of proof is required in criminal cases than in civil cases. But this is subject to the qualification that there is no absolute standard in either case. In criminal cases the charge must be proved beyond reasonable doubt, but there may be degrees of proof within that standard. As Best C.J., and many other great judges have said, 'in proportion as the crime is enormous, so ought the proof to be clear.' So also in civil

15 (1909) 25 T.L.R. 612; 2 Cr.App. R. 217, 242.

16 Cited inaccurately from Lord Brougham's Speeches, vol. 1, 227, q.v.

17 [1951] P. 35, 36, 37.

cases, the case may be proved by a preponderance of probability, but there may be degrees of probability within that standard. The degree depends on the subject-matter. A civil court, when considering a charge of fraud, will naturally require for itself a higher degree of probability than that which it would require when asking if negligence is established. It does not adopt so high a degree as a criminal court, even when it is considering a charge of a criminal nature; but still it does require a degree of probability which is commensurate with the occasion."

This citation comes from a judgment given on appeal in a divorce case. The House of Lords has now held in Preston-Jones v. Preston-Jones¹⁸ that the words of the Divorce Act [the Matrimonial Causes Act, 1950] produce the same result as the rule in criminal cases although divorce cases are civil actions. Nevertheless, on the general question of the standard of proof in criminal and civil cases, I would like to express my complete concurrence with the words used by Denning L.J. in the passage I have cited. Just as in civil cases the balance of probability may be more readily tilted in one case than in another, so in criminal cases proof beyond reasonable doubt may more readily be attained in some cases than in others.

On the other questions of law and fact raised on this appeal and on the issue as to damage, I agree with the judgment of Denning L.J., and also with the judgment which Morris L.J. is about to deliver, which I have had the advantage of reading.

The appeal should be allowed to the extent stated, and the cross-appeal dismissed. I agree with the form of order proposed.

MORRIS L.J. After a very full hearing which extended over many days, the judge delivered a judgment in the course of which he examined and analysed all the evidence. The plaintiff had become aware that the defendants possessed a Herbert No. 4 capstan lathe. The plaintiff, accompanied by his engineer, went to see it, and had an interview with Mr. Neuberger at which others were present. There was a discussion about the machine. There was bargaining about its price. The plaintiff was shown the gears. The power was turned on. The plaintiff thought that the machine was fit for immediate use and that it would avail him for some work of his that he had in mind. The plaintiff as a result acquired the machine. The acquisition was not effected

18 [1951] A.C. 391; [1951] 1 T.L.R. 8; [1951] 1 All E.R. 124.

by direct purchase but by the assisting introduction of a hire-purchase company. The plaintiff affirmed and Mr. Neuberger denied that in the course of the discussion Mr. Neuberger had said that the machine had been "Soag reconditioned." The significance of the phrase in question was well understood by those concerned. It was first of all a question of fact whether Mr. Neuberger had made the alleged statement. The judge held that he had. On that finding the question arose whether what Mr. Neuberger had said had contractual effect. Being an affirmation made during negotiations for a sale, it would not have been surprising if it had been held that the statement had contractual quality. But the judge made a correct approach in law when he considered the totality of the evidence so as to decide whether contractual intention existed. There was much oral evidence to be considered: there was correspondence which, either by reason of what it contained or by reason of what it did not contain, had some evidential value. The judge had no hesitation in holding that the statement of Mr. Neuberger was not contractual. He held that neither the plaintiff nor Mr. Neuberger had thought it to be. "It was simply a matter of talking about the machine." Although wrong statements made when someone is about to buy ought not readily to be held to be beyond the frontiers of contract, it seems to me that the judge approached the issue with discrimination. He appears to have applied the correct tests, and, accordingly, I do not think that his conclusion should be displaced.

It is not in dispute that if Mr. Neuberger made a representation that the machine was Soag reconditioned he knew that the representation was false. Accordingly, if the representation was made, then, although there was no warranty, there was an actionable misrepresentation. But here a question arises as to whether the judge misdirected himself when deciding the issue as to whether the two words "Soag reconditioned" were or were not spoken. He has said that if as to this he ought to be satisfied in the way in which a court or a jury would have to be satisfied before convicting in a criminal case, then in this case he was not so satisfied, but he was satisfied if he was entitled to decide the matter as issues in civil actions are decided, that is, according to the balance of probabilities. The precision of this revealed judicial heart-searching is impeccable from the point of view of its logical nicety. The question of fact which the judge had to decide was simply whether Mr. Neuberger spoke the two words in question. If he did, the words might have been a warranty

or they might have been a representation, which in this case would be actionable because fraudulent. It would be strange if different standards of proof as to the speaking of the two words could be applicable according as to what civil legal rights followed.

In a criminal case a jury must be directed that the onus is all the time upon the prosecution and that before they convict they must feel sure of the accused's guilt. Authoritative guidance in regard to directing juries in criminal cases is to be found in the judgment of Lord Goddard C.J. in Regina v. Hepworth and Fearnley,¹⁹ and in other cases. It has, however, been emphasized that what is vital is not the mere using of some particular formula of words but the effect of a summing-up in giving true guidance as to the right approach.

It is, I think, clear from the authorities that a difference of approach in civil cases has been recognized. Many judicial utterances show this. The phrase "balance of probabilities" is often employed as a convenient phrase to express the basis upon which civil issues are decided. It may well be that no clear-cut logical reconciliation can be formulated in regard to the authorities on these topics. But perhaps they illustrate that "the life of the law is not logic but experience." In some criminal cases liberty may be involved; in some it may not. In some civil cases the issues may involve questions of reputation which can transcend in importance even questions of personal liberty. Good name in man or woman is "the immediate jewel of their souls."

But in truth no real mischief results from an acceptance of the fact that there is some difference of approach in civil actions. Particularly is this so if the words which are used to define that approach are the servants but not the masters of meaning. Though no court and no jury would give less careful attention to issues lacking gravity than to those marked by it, the very elements of gravity become a part of the whole range of circumstances which have to be weighed in the scale when deciding as to the balance of probabilities. This view was denoted by Denning L.J. when in his judgment in Bater v. Bater²⁰ he spoke of a "degree of probability which is commensurate with the occasion" and of "a degree of probability which is proportionate to the subject-matter."

In English law the citizen is regarded as being a free man of good repute. Issues may be raised in a civil action which affect character and reputation, and these will not be forgotten by

19 [1955] 2 Q.B. 600; [1955] 2 All E.R. 918.

20 [1951] P. 35, 36, 37.

judges and juries when considering the probabilities in regard to whatever misconduct is alleged. There will be reluctance to rob any man of his good name: there will also be reluctance to make any man pay what is not due or to make any man liable who is not or not liable who is. A court will not be deterred from a conclusion because of regret at its consequences: a court must arrive at such conclusion as is directed by the weight and preponderance of the evidence.

In my judgment, the judge did not misdirect himself in approaching the case on the basis of the preponderance of probability in deciding that Mr. Neuberger had stated that the machine was Soag reconditioned. It follows that there is liability if damage resulted and if damage was proved. I consider that there was resulting damage as indicated by my Lord, and I agree with the course proposed.

Solicitors: Goodman, Monroe & Co.; C. Butcher & Simon Burns.

M. M. H.