[COURT OF APPEAL]

SMITH v. LAND AND HOUSE PROPERTY CORPORATION.

[1882 S. 4469.]

Vendor and Purchaser - Misrepresentation.

The Plaintiffs put up an hotel for sale on the 4th of August, 1882, stating in the particulars that it was let to "F. (a most desirable tenant), at a rental of £400 for an unexpired term of 27½ years." The L. Co. sent M., their secretary, to inspect the property. M. reported that F., from the business he was doing could hardly pay the rent, and that the town in which it was situate seemed to be in the last stage of decay. The directors on receiving this report, directed M. to bid up to £5000. M. went and bought for £4700. Before completion, F. went into liquidation, and the L. Co. refused to complete. The Plaintiffs sued for specific performance. It was proved that on the 1st of May, 1882, the Lady Day quarter's rent was wholly unpaid; that a distress was then threatened, and that F. paid £30 on the 6th of May, £40 on the 13th of June, and the remaining £30 shortly before the auction, and that no part of the quarter's rent due at Midsummer had been paid. The chairman of the company was orally examined, and deposed most positively, that the company would not have bought but for the representation in the particulars that F. was a most desirable tenant. Mr. Justice Denman held that there was a material misrepresentation, and that the contract had been entered into in reliance upon it. His Lordship accordingly dismissed the action, and on a counter-claim by the Defendants, rescinded the contract.

Held, on appeal, that the description of F., as a most desirable tenant, was not a mere expression of opinion, but contained an implied assertion that the vendors knew of no facts leading to the conclusion that he was not; that the circumstances relating to the Lady Day rent shewed that he was not a desirable tenant; and that there was a misrepresentation:

Held also, that, as the positive testimony of the chairman, that but for this representation the company would not have bought, was not shaken on cross-examination, and was believed by the Judge who saw and heard the witness, the Court of Appeal would not disturb the finding that the representation had induced the company to enter into the contract, and that the appeal must be dismissed.

THE Plaintiffs as mortgagees with a power of sale, advertised for sale by auction on the 4th of August, 1882, at the Auction Mart, London, a freehold hotel, at Walton-on-the-Naze, which in the title-page of the particulars, was described as "now held by a very desirable tenant, Mr. Frederick Fleck, for an unexpired term

of twenty-eight years, at a rent of £400 per annum." In the body of the particulars, it was stated that "the whole property is let to Mr. Frederick Fleck (a most desirable tenant), at a rental of £400 per annum (clear of rates, taxes, insurance, &c.), for an unexpired term of 27½ years, thus offering a first-class investment."

The directors of the Land and House Property Corporationhaving become aware that the property was being offered for sale, sent down their secretary to visit it, and report to the next committee.

The secretary, Mr. M'Lewin, reported as follows: "On Saturday, I visited Walton-on-the-Naze, with the view of inspecting the Marine Hotel. The hotel has been built over forty years, and up to a recent period enjoyed a high reputation as a respectable and thriving hotel. Mr. Fleck, the landlord, from the amount of business he is now doing, can scarcely pay the amount of rent with rates and taxes. It seems to be a mystery in the town itself how Mr. Fleck, with his eyes open, could have been induced to take the hotel at the present rental. The only thing that I see that can be done with the hotel to make it pay as an investment, would be to make the small theatre into a kind of music-hall, and to convert the billiard-room into a kind of casino. The town itself seems to be in the very last stage of decay from beginning to end. The old pier, wrecked on the 18th of January, 1881, has never been replaced. The landslip which occurred on the above occasion, has never been made good."

This report was read at a meeting of the committee on the 1st of August, 1882, at which Alderman Knight, afterwards Lord Mayor of London, was in the chair. The committee passed a resolution instructing the secretary to bid up to £5000. The secretary attended at the auction, but did not bid, and the property was bought in, the reserved bidding not having been reached. The secretary immediately afterwards made a proposal to purchase by private contract, and an agreement was signed on the same day for purchase, at £4700.

Fleck, in September, went into liquidation. The purchasers thereupon, refused to complete, and in October the vendors brought this action for specific performance. The Defendants, by their statement of defence alleged (inter alia) that Fleck was not

a desirable tenant as stated in the particulars, but was quite unable to pay the rent of £400 a year. That such rent was in arrear at the time of the sale. That Fleck was insolvent, and shortly afterwards filed his petition for liquidation. The Defendants by counter-claim, claimed a return of the deposit; expenses of investigating the title, and cancellation of the contract, or, in the alternative, compensation for misdescription.

The misrepresentation on which the case turned was as to Fleck's character as a tenant. As to this the evidence was as follows: Fleck had been tenant from 1880, and there was no evidence as to the payment of his rent prior to January, 1882, when the Plaintiffs gave him notice to pay rent to them. A quarter's rent became due at Lady Day, and it not having been paid, the Plaintiffs on the 1st of May, threatened a distress. Fleck then wrote to ask for time. The Plaintiffs replied that the rent could not be allowed to remain over Whitsuntide; and on the 6th of May, Fleck paid £30 on account. On the 13th of June he paid £40 more on account, and the balance of £30 was paid some time before August, but on what day did not appear. At the time when the sale took place, the Midsummer rent had been applied for, but no part of it had been paid. Fleck's references when he had been accepted as tenant, were shewn to have been very good, and it was deposed to that he was an able manager of an hotel. The description of Fleck as a desirable tenant, was inserted by the auctioneer who had been at the place and seen Fleck. He said that he considered him a very proper person to be landlord of such an hotel, that he seemed to be in a flourishing condition, and that there were no signs of insolvency about him or his hotel. The auctioneer had prepared the particulars and inserted this description without any instructions on the subject.

As regards the question whether the contract had been entered into in reliance on the statement as to Fleck's being a most desirable tenant, Alderman Knight was orally examined before Mr. Justice Denman, who tried the action. He deposed, that at the meeting when the secretary was directed to bid, the directors had no information about Fleck's position, except what was given in the particulars of sale, which were before them and were particularly referred to, especially on the point of the "desirable

tenant." He was asked "was there anything which particularly directed your attention to that? - A. Yes, certainly, that was the main security offered to us, it was the most important point of the whole particulars." "Q. Will you explain that a little further. Having regard to the secretary's report, did it have much bearing on your mind? - A. Most assuredly. The secretary's report as regards the condition of Walton-on-the-Naze was of so unsatisfactory a character, that had it not been for the assurance that we had 'a desirable tenant' and 'a most desirable tenant,' I would not have purchased the property at all." "Q. Can you say whether that was the view of the other gentlemen who were present at the board? - A. As far as I can say, that was the unanimous opinion of the whole board." ... "Q. Did you at the time know that Fleck was on the eve of insolvency? - A. At that time we knew nothing but that Fleck was described as 'a most desirable tenant." "Q. And you trusted to that statement? - A. Assuredly. Had we had a hint that he was at all insolvent, or that there was any difficulty in paying his rent, I should not have bought the property, on account of the report of the bad surroundings."

There was some reference in the evidence to a conversation alleged to have taken place at the sale between the auctioneer and McLewin, from which it was to be inferred that the latter understood Fleck not to be in solvent circumstances, but whether there was in fact any conversation justifying that inference did not appear. The point is mentioned, as the question whether McLewin's knowledge on that subject would have been material is dealt with in the judgments.

Mr. Justice Denman, sitting for Mr. Justice North, held that there was a material misrepresentation, and that the contract had been entered into on the faith of it. His Lordship therefore dismissed the vendors' action and rescinded the contract. The vendors appealed, and the appeal was heard on the 27th of October, 1884.

W. W. Karslake, Q.C., and Asquith, for the appeal:-

We say, first, that the statement that Fleck was a very desirable tenant was a mere expression of opinion, and one not

recklessly made. There is evidence that he was a very good manager of an hotel, and there is nothing against him, but that his quarter's rent due at Lady Day was not promptly paid, and that at a bad time of the year. That he became insolvent shortly afterwards cannot affect the case, there being nothing to fix the vendors with notice that he was likely to become so, and the mere fact that he was in arrear for a few weeks for a quarter's rent does not make it improper to call him a desirable tenant. Then the purchasers made inquiries, and must be taken to have acted on what they found out. It is true that Alderman Knightdeposes that the representation as to Fleck was relied upon, but he appears to have relied upon it because he understood it as a guarantee that Fleck would go on paying the rent for the remainder of the twenty-eight years, which is a construction that it will not bear.

[BOWEN, L.J.:- Nobody will attempt to put it so high as that. The representation cannot amount to more than a statement that Fleck was likely to pay the rent, and I do not think that Alderman Knight understood it to mean more.]

The Plaintiffs were justified in saying that. Again, the description is merely one of the flourishing descriptions which auctioneers insert and which do not amount to a statement of any specific fact, but only put a purchaser on inquiry. Thus the describing a house as a substantial and convenient house was held not fatal: Johnson v. Smart (1), though the house was very much the reverse. So as to the description of a meadow as uncommonly rich water meadow, though it was very ill supplied with water: Scott v. Hanson (2). So in Trower v. Newcome (3) a purchaser was held to his bargain, though it was stated that an avoidance of an advowson was likely to occur soon, and the incumbent was only thirty-two. Again, the agent had a discretion how far he would go towards £5000, and he made inquiries for himself. The purchasers therefore cannot be taken to have relied on the representations: Clapham v. Shillito (4).

[FRY, L.J.:- Was not the agent functus officio as regards discretion

(1) 2 Giff. 151.

(2) 1 Sim. 13; 1 Russ. & My. 128.

(3) 3 Mer. 704.

(4) 7 Beav. 146.

on the 4th of August? He had made his report, and was instructed to bid up to £5000.

BOWEN, L.J.:- Is it not a question of fact in each case whether the representation was relied on?

FRY, L.J., referred to Redgrave v. Hurd (1).]

In that case there was a misrepresentation as to the amount of the profits of the business, a definite mis-statement of a fact within the vendor's own knowledge; here we have nothing but a vague laudatory flourish, which, according to the opinion of Sir W. Grant in Trower v. Newcome (2), goes for nothing. The report here shews that the secretary made inquiries as to Fleck's circumstances, and whatever knowledge he had must be attributed to the directors.

Davey, Q.C., and W. A. Raikes, contrˆ, were not called upon.

BAGGALLAY, L.J.:-

On the 4th of May, 1882, the Plaintiffs entered into a contract with the Defendants for the sale to them of certain property described in particulars of sale. The property had been offered for sale by auction, but no sale was effected, and immediately afterwards this contract was entered into. The purchasers declined to complete, saying that they had been induced by misrepresentation to enter into the contract. Early in October, 1882, this action was commenced by the vendors for specific performance. It was met by a statement of defence, accompanied by a counter-claim for rescission of the contract or compensation. The foundation of the counter-claim is that the property was first described in the particulars as held by Fleck, "a very desirable tenant," and then again as "let to Mr. F. Fleck (a most desirable tenant, at a rental of £400 per annum, for an unexpired term of twenty-seven and a half years, thus offering a first-class investment." It is alleged that this was a false representation, for that it was not true that Fleck was a "very desirable" or a "most desirable" tenant. The vendors entered into receipt of the rents in January, 1882. We have no evidence as to the receipt of rent which accrued before Lady Day, 1882, but as to the quarter's

(1) 20 Ch. D. 1.

(2) 3 Mer. 704.

rent which accrued on that day it is in evidence that it was not paid at once; that a distress was threatened, but not put in, and that the tenant paid £30 on the 6th of May, £40 on the 13th of June, and the balance of £30 some time before August, but at what precise time it does not appear. At the date of the auction, on the 4th of August, the Midsummer rent had been applied for, but no part of it had been paid. Under this state of things the representation in question was made. It is said that these are words of course put in by the auctioneer, but I hold it to be the duty of a vendor to see that the property is not untruly described, and I cannot hold him to be excused because a description which the property will not bear has been inserted by the auctioneer without his instructions. Nor can the auctioneer excuse himself for inserting a false representation by saying that he did not know it to be untrue. I think that Mr. Justice Denman came to a correct conclusion as to there having been a material misrepresentation, for the vendors must have known perfectly well that the tenant did not pay his rent properly, and they therefore were not justified in describing him as a very desirable tenant.

We have then to consider whether the representation materially influenced the Defendants in coming to a conclusion to bid for the property. The evidence on this head is all one way. [His Lordship read the passages from the evidence of Alderman Knight which are given above.] This evidence is uncontradicted. It is true that in a case of this kind it would be very difficult to find any person who could contradict the evidence, and reliance was placed on the secretary's report. [His Lordship read the report.] I think that the expressions in this report as to Fleck from the amount of business he was doing being hardly able to pay the rent, only meant to say that, according to the amount of business at present going on, it was difficult to see how Fleck could pay his rent and taxes out of the profits, and that these expressions do not at all tend to shew that he was not a desirable tenant, for he might have means which would enable him to go on paying the rent till the business improved. Then Alderman Knightstates most positively that having regard to the surroundings he should not have purchased but for the representation that Fleckwas a very desirable tenant. It must then in my opinion be

considered that the representation was relied on. Now a man who paid his rent so irregularly could not properly be represented as a desirable tenant. After the report had been considered by the directors, the secretary was authorized to attend at the auction and bid up to £5000. The secretary no doubt saw that the biddings were going in such a way that he should have a chance of getting a better bargain by private contract. He did not bid, but immediately after the auction, the property not having been sold, he agreed to purchase for £4700. Some observations were made on a conversation alleged to have taken place between the secretary and the auctioneer, tending to shew that the former knew something to Fleck's disadvantage. But the secretary on this occasion was an agent for a particular purpose, being directed to buy the property if he could get it for a sum not exceeding £5000, it was no part of his business to regulate his bidding by what he learnt about the tenant. What he may have heard or said on that occasion, when he was only sent as an agent for the purpose of buying on the best terms he could get not exceeding £5000, cannot be evidence against the directors.

I need not say much as to the cases. In Scott v. Hanson (1) and Trower v. Newcome (2), the question was whether there was any misrepresentation or not. In Trower v. Newcome a living was described as likely to become vacant soon, and a statement was made orally that it would become vacant on the death of a person aged eighty-two. This did not amount to a representation that the incumbent's age was eighty-two. Redgrave v. Hurd (3) is in favour of the purchasers. On the facts as found in the present case I think that Mr. Justice Denman came to a right conclusion.

BOWEN, L.J.:-

I am of the same opinion. The action is by vendors for specific performance, and the purchasers allege that there is in the particulars a misrepresentation which disentitles the Plaintiffs to specific performance. To sustain this defence the Defendants must prove that there was a material misrepresentation, and that they entered into the contract on the faith of the representation.

(1) 1 Sim. 13; 1 Russ. & My. 128.

(2) 3 Mer. 704.

(3) 20 Ch. D. 1.

Was there then a misrepresentation of a specific fact? This partly depends on the question, whether on the construction of the particulars, what they say as to Fleck is a representation of a specific fact, a question which the Court of Appeal has the same means of deciding as the Judge in the Court below. Whether the purchasers relied upon it is a question of fact which the Judge of the Court below had better means of deciding than we have, for he saw and heard the witnesses.

In considering whether there was a misrepresentation, I will first deal with the argument that the particulars only contain a statement of opinion about the tenant. It is material to observe that it is often fallaciously assumed that a statement of opinion cannot involve the statement of a fact. In a case where the facts are equally well known to both parties, what one of them says to the other is frequently nothing but an expression of opinion. The statement of such opinion is in a sense a statement of a fact, about the condition of the man's own mind, but only of an irrelevant fact, for it is of no consequence what the opinion is. But if the facts are not equally known to both sides, then a statement of opinion by the one who knows the facts best involves very often a statement of a material fact, for he impliedly states that he knows facts which justify his opinion. Now a landlord knows the relations between himself and his tenant, other persons either do not know them at all or do not know them equally well, and if the landlord says that he considers that the relations between himself and his tenant are satisfactory, he really avers that the facts peculiarly within his knowledge are such as to render that opinion reasonable. Now are the statements here statements which involve such a representation of material facts? They are statements on a subject as to which prim‰ facie the vendors know everything and the purchasers nothing. The vendors state that the property is let to a most desirable tenant, what does that mean? I agree that it is not a guarantee that the tenant will go on paying his rent, but it is to my mind a guarantee of a different sort, and amounts at least to an assertion that nothing has occurred in the relations between the landlords and the tenant which can be considered to make the tenant an unsatisfactory one. That is an assertion of a specific fact. Was it a true assertion? Having regard to what took place between

Lady Day and Midsummer, I think that it was not. On the 25th of March, a quarter's rent became due. On the 1st of May, it was wholly unpaid and a distress was threatened. The tenant wrote to ask for time. The Plaintiffs replied that the rent could not be allowed to remain over Whitsuntide. The tenant paid on the 6th of May £30, on the 13th of June £40, and the remaining £30 shortly before the auction. Now could it at the time of the auction, be said that nothing had occurred to make Fleck an undesirable tenant? In my opinion a tenant who had paid his last quarter's rent by driblets under pressure must be regarded as an undesirable tenant.

Treating this then as a misrepresentation, did it induce the purchasers to buy? It appears to me that it is in every case a question of fact whether a person is induced to buy by a particular representation. We may obtain valuable hints from reported cases, but none of the cases appear to me to impugn the proposition that the question is one of fact to be decided on the circumstances of each particular case. A representation in the particulars must be taken as made for the purpose of influencing the purchaser's mind. Then did the purchaser rely upon it? I cannot quite agree with the remark of the late Master of the Rolls in Redgrave v. Hurd (1), that if a material representation calculated to induce a person to enter into a contract is made to him it is an inference of law that he was induced by the representations to enter into it, and I think that probably his Lordship hardly intended to go so far as that, though there may be strong reason for drawing such an inference as an inference of fact. But here we are not left to inference. The chairman of the company was called and swore in the most distinct and positive way that it did influence him, and that but for the representation he would not have purchased. The Judge was at liberty to disbelieve him, but I see no reason why he was bound so to do. His evidence was not shaken on cross-examination, and the Judge believed him. He uses the very argument that the property had been examined on behalf of the company as strengthening the statement that the company relied on the representation, for he says the report of the secretary was so unfavourable that but for the representation as to the tenant they would not have bought.

(1) 20 Ch. D. 1, 21.

Redgrave v. Hurd (1) shews that a person who has made a misrepresentation cannot escape by saying, "You had means of information, and if you had been careful you would not have been misled." It was urged that Alderman Knight would not have relied on the representation had he not put on it a construction that it will not bear, viz., that it was a guarantee that the tenant would go on paying the rent. I do not think that he understood it so. I think he merely understood it as a representation that, so far as the vendors knew, the tenant was likely to go on paying the rent for the rest of the term. If we had merely to deal with the evidence of Alderman Knight on paper, I should not feel quite satisfied that we ought to treat it as satisfactory, but as the Judge who heard and saw him was satisfied, I think that we ought not to differ from his conclusion.

FRY, L.J.:-

After the full discussion of this case by my learned Brothers I have little to add. The first question is whether the stating Fleck to be a very desirable tenant was a misrepresentation. It seems to me that the vendors by describing him as such stated in substance that they knew no fact which shewed him not to be a desirable tenant. The Judge in the Court below has found that they did know facts which shewed him not to be a desirable tenant, and I see no reason to dissent from that conclusion.

The second question is whether the purchasers purchased on the faith of that representation. The learned Judge has found that they did. On that question I feel the same difficulty as Lord Justice Bowen, and on the evidence as read before us I should have felt inclined to come to the conclusion that the contract was not induced by that representation; but as Mr. Justice Denman, who saw and heard Alderman Knight, was satisfied with his evidence, I cannot give my voice for reversing his decision.

Solicitors for Plaintiffs: R. S. Taylor, Son, & Humbert.

Solicitors for Defendants: Smythe & Brettell.

(1) 20 Ch. D. 1.

H. C.J.