[COURT OF APPEAL]

GROSS v. LEWIS HILLMAN LTD. AND ANOTHER

[1966 G No. 2770]

Court of Appeal - Fact, question of - Appeal from High Court - Fraud - Acquittal by judge - Grave doubts about judge's finding - Finding to be displaced on appeal only if Court of Appeal convinced ending wrong.

Fraud - Misrepresentation - Vendor and purchaser - Misrepresentations as to status of lessee in letters to prospective purchaser of reversion - Contract for purchase entered into by purchaser on basis of letters - Benefit of contract assigned to plaintiff - Reversion conveyed to plaintiff on direction of purchaser - Whether plaintiff can rely on misrepresentations.

Equity - Rescission - Contract for sale of land - Benefit of contract assigned to plaintiff - Conveyance to plaintiff - on direction of purchaser - Whether right of rescission for misrepresentation runs with land.

The plaintiff instructed G. Ltd., property dealers, to find a suitable office or shop property for her to purchase as an investment. The first defendants owned a shop in Stockport, the reversion of which the second defendants, estate agents, were instructed to sell. The first defendants were wholly controlled by J., who was also the principal of the second defendants. J. had arranged to let the shop together with three other vacant shops to H. Ltd., a dormant wool company whose shares had recently been bought by two brothers planning to set up a chain of wool shops.

The second defendants introduced the shop to G. Ltd. by two letters. In the first letter they stated that the shop had been let to H. Ltd. on a 21 years full repairing and insuring lease at £800 per annum exclusive for the sale of wool and hosiery, and that H. Ltd. also had retail branches in three other towns. G. Ltd. asked for the tenant's references, to which the second defendants replied that H. Ltd. was incorporated in 1928, had a paid up capital of £5,000, and enclosed a banker's reference in connection with the letting of another shop to H. Ltd. at £3,000 per annum exclusive.

G. Ltd., believing as a result of those letters that H. Ltd. was a going concern, agreed to purchase the shop on its own behalf. At the same time it recommended the plaintiff to purchase the shop and offered to let her have the benefit of its contract in return for a commission of two and a quarter per cent. of the purchase price.

The plaintiff decided as the result of that recommendation to purchase the shop, and it was conveyed to her directly by the first defendants, to whom she paid the purchase price of £7,700, at the request and on the direction of G. Ltd. H. Ltd. was not successful in its trading and after three months became insolvent and went into liquidation.

In an action by the plaintiff against the first defendants to rescind the conveyance and against both defendants for damages for deceit on the ground of fraudulent misrepresentation the plaintiff relied on the representations in the two

letters as to the status of H. Ltd. The judge, reading the letters separately, held that there was no representation in the letters which was false to the knowledge of the second defendants and acquitted J., the moving spirit of both defendants, of any intention to deceive. He, accordingly, dismissed the plaintiff's action.

On appeal by the plaintiff, in which she asked in the alternative for a new trial, the defendants by a respondents' notice also sought to uphold the judgment on the additional ground that even if there had been any misrepresentations, the plaintiff could not rely on them since they were not addressed to her:-

Held, dismissing the appeal, (1) that although the judge had erred in not reading the letters together and looking at their overall effect, which gave the false impression that H. Ltd. had been trading successfully through several outlets for years, yet the defendants could not be guilty of fraudulent misrepresentation unless they intended to give that false impression (post, pp. 459A-C, G-H, 464H - 465A).

Angus v. Clifford [1891] 2 Ch. 449, C.A. and Akerhielm v. De Mare [1959] A.C. 789; [1959] 3 W.L.R. 108; [1959] 3 All E.R. 485, P.C. applied.

(2) That an appellate court could not hold someone guilty of fraud when the judge who saw and heard him acquitted him of it unless the appellate court was convinced that the judge was wrong, albeit that it had doubts about the judge's finding (post, pp. 459F, 463A-C), and (Harman L.J. dissenting) since it was not so convinced, the defendants were not guilty of fraudulent misrepresentation (post, pp. 460A-B, 464G).

Yuill v. Yuill [1945] P. 15; [1945] 1 All E.R. 183, C.A. applied.

Per Harman L.J. The defendants meant the two letters in the sense which they undoubtedly bore and were guilty of fraudulent misrepresentation (post, p. 463E).

(3) That no new trial would be ordered on the fraud issue, since even if the defendants had been guilty of fraudulent misrepresentations, the plaintiff could not rely on them, for the right to rescind for misrepresentation was not an equity which ran with the land and even if she was within the class of persons to whom the representations were made she fell out of the class when G. Ltd. agreed to purchase the property for itself whereupon the representations were spent and lost their efficacy (post, pp. 460E-G, 461F-G, 463F-G, 465D).

Edinburgh United Breweries Ltd. v. Molleson [1894] A.C. 96, H.L.(Sc.) and Peek v. Gurney (1873) L.R. 6 H.L. 377. H.L.(E.) applied.

Dickinson v. Burrell (1866) L.R. 1 Eq. 337 and Pilmore v. Hood (1838) 5 Bing.N.C. 97 distinguished.

The following cases are referred to in the judgments:

Akerhielm v. De Mare [1959] A.C. 789; [1959] 3 W.L.R. 108; [1959] 3 All E.R. 485, P.C.

Angus v. Clifford [1891] 2 Ch. 449, C.A.

Dickinson v. Burrell (1866) L.R. 1 Eq. 337.

Edinburgh United Breweries Ltd. v. Molleson [1894] A.C. 96, H.L.(Sc).

Peek v. Gurney (1873) L.R. 6 H.L. 377, H.L.(E.).

Pilmore v. Hood (1838) 5 Bing.N.C. 97.

Yuill v. Yuill [1945] P. 15; [1945] 1 All E.R. 183, C.A.

The following additional cases were cited in argument:

Abram Steamship Co. Ltd. v. Westville Shipping Co. Ltd. [1923] A.C. 773, H.L.(Sc.).

Andrews v. Mockford [1896] 1 Q.B. 372, C.A.

Arkwright v. Newbold (1881) 17 Ch.D. 301, C.A.

Armstrong v. Strain [1952] 1 K.B. 232; [1952] 1 All E.R. 139, C.A.

Collins v. Associated Greyhound Racecourses Ltd. [1930] 1 Ch. 1, C.A.

Cornfoot v. Fowke (1840) 6 M. & W. 358.

Derry v. Peek (1889) 14 App.Cas. 337, H.L.(E.).

Erlanger v. New Sombrero Phosphate Co. (1878) 3 App.Cas. 1218, H.L.(E.).

Glasier v. Rolls (1889) 42 Ch.D. 436, C.A.

Khoo Sit Hoh v. Lim Thean Tong [1912] A.C. 323, P.C.

Oakes v. Turquand and Harding (1867) L.R. 2 H.L. 325, H.L.(E.).

Powell v. Streatham Manor Nursing Home [1935] A.C. 243, H.L.(E.).

Swift v. Winterbotham (1873) L.R. 8 Q.B. 244, D.C.

Watt (or Thomas) v. Thomas [1947] A.C. 484; [1947] 1 All E.R. 582, H.L. (Sc.).

Wilson v. Short (1847) 6 Hare 366.

Woyka & Co. v. London & Northern Trading Co. Ltd. (1922) 10 Ll.L.R. 110, C.A.

APPEAL from Russell L.J., sitting as an additional judge of the Chancery Division.

The following statement is taken substantially from the judgment of Cross L.J. Grace Rymer Investments Ltd. was a property dealing and investment company which purchased properties for clients and also purchased properties on its own behalf. Its managing director was a Colonel Sinclair who had been asked in April, 1965, to find suitable office or shop property for purchase as an investment by the plaintiff, Mrs. Anne Gross. It was Colonel Sinclair's policy not to recommend to a client property for purchase unless Grace Rymer was also prepared to purchase it. The solicitor acting for Grace Rymer was Mr. A. Kramer, who was also the plaintiffs' solicitor.

The first defendants, Lewis Hillman Ltd., was a property company wholly controlled by Edward Allan James. The second defendants, Henry James & Partners, were a firm of estate agents the principal of which was James.

James specialised in purchasing through one of his companies vacant shop premises, finding a tenant for them, and selling the freehold reversion as soon as possible after the tenant had been installed. As an inducement to the tenant to take a lease of the premises he often made the tenant substantial cash payments, in the form of "shop fitting allowances," to reimburse such expenditure on the tenants' part. Many of the persons to whom he sold the investments which he had created in that way were large property companies, advised by eminent surveyors, which had not complained of their bargains.

In July, 1965, Grace Rymer, acting as agents for the plaintiff, had purchased a shop at Horsham, Sussex, from a company controlled by James and which he as the principal of the second defendants had introduced to Grace Rymer.

At the end of August, 1965, James arranged to let four vacant shops in Blackpool, Stockport, Southport and Liverpool to a dormant wool company, H. G. Somers & Sons Ltd., which had been incorporated in 1928, and the shares in which had been recently purchased by two brothers, John and Robert Marshom. He proceeded, on behalf of the first defendants, to sell the reversion of the shop in Stockport - 93 Castle Street, Edgeley, Stockport, Cheshire (in respect of which he had made a shop-fitting allowance of £500 to H. G. Somers & Sons Ltd.) - and to that end addressed as principal of the second defendants a number of letters to possible purchasers. On September 1, 1965, the second defendants sent the following letter to Grace Rymer:

"We have just received instructions to sell the above freehold shop investment property which may be of interest to you"

which, after describing Edgeley and the property, proceeded:

"The entire property has been let to Messrs. H. G. Somers & Sons of Bradford on a full repairing and insuring lease for a term of 21 years from September, 1965, at a rent of £800 per annum exclusive with a rent revision at the 7th and 14th years for the sale of hosiery, wools, textile goods and clothing. The tenants also have retail branches at Liverpool, Blackpool and Southport. The property is freehold, subject to a chief rent of £5 per annum, and our instructions are to quote a price of £9,000. In the event of your further interest we will be pleased to hear from you."

The lease was not actually granted until September 8, but the letter made it clear that it was a new lease and nothing turned on that. Grace Rymer answered on September 2:

"We thank you for your letter of the 1st instant, and we shall be glad to have a copy of the lessee's references, It would be helpful, also, if we could see a street plan."

On September 3 the second defendants replied:

"Re 93 Castle Street, Edgeley, Stockport. We thank you for your letter of the 2nd instant and as requested enclose herewith a street plan. The lessees, Messrs. H. G. Somers & Sons Ltd., were incorporated on June 11, 1928, and have a paid-up capital of £5,000. We enclose a bankers reference received in connection with a letting of other shop premises to this company at a rent of £3,000 per annum exclusive. We will look forward to hearing from you further in due course."

The reference enclosed was dated September 1, 1965, was addressed by Mr. Youngs, the manager of the City Road, E.C.1 branch of Midland Bank Ltd., to James and was given in connection with the subletting of the Blackpool shop by the first defendants to H. G. Somers & Sons Ltd., and read:

"Re H. G. S. & Sons Ltd. Your enquiry dated August 31, 1965, Reply: respectably constituted private company. From what we know of their affairs we consider them good for your figures and purposes."

In fact, Mr. Youngs knew nothing of H. G. Somers & Sons Ltd. except what he had been told by James, who was an old and valued customer. He gave the reference on the self induced assumption that James was backing H. G. Somers & Sons Ltd. and would be behind it. After some negotiations Grace Rymer offered to purchase the reversion of the shop at Edgeley, Stockport, from the first defendants, for £7,900, subject to contract and on September 16, 1965, instructed its solicitor, Mr. A. Kramer, to proceed with the purchase on its behalf, at the same time recommending to the plaintiff through Mr. Kramer the purchase of the shop as a suitable investment for her, and offered to let her have it on payment to Grace Rymer of a buying commission of two and a quarter per cent. of the purchase price.

Mr. Kramer, acting for Grace Rymer, sent inquiries before contract to Clintons, the solicitors acting for the first defendants. No. 42 read: "If copy references of the lessee have not already been supplied to our clients, please confirm that these were satisfactory." Clintons' answer was: "References have already been supplied to your clients." That was a reference to the bankers' reference enclosed in the letter of September 3.

The contract between Grace Rymer and the first defendants for the purchase of 93 Castle Street, at a revised price of £7,700, subject to the lease to Somers, became unconditional on October 21.

At the end of October, 1965, the plaintiff, as the result of Grace Rymer's recommendation, decided to purchase the shop.

On November 3 Kramer, acting on behalf of the plaintiff as the purchaser, delivered requisitions on title to Clintons. No. 2 read:

"Will the vendor confirm that, if the preliminary enquiries made on behalf of the purchaser and replied to on September 16, 1965, were repeated herein, the replies at the present date would be the same as those already made and that they would be the same if answered by the vendor? If not, please give full particulars of any variation."

The answer given by Clintons to that, on November 5, was: "Confirmed."

The property was conveyed by the first defendants to the plaintiff by a conveyance dated November 17, 1965, which recited that she had agreed to buy it for £7,700, Grace Rymer having previously given the first defendants a written authority to convey the property to her instead of to it. H. G. Somers & Sons Ltd. started trading in its various shops in September or October, 1965; but its new career was short and disastrous. At the end of the year it was insolvent, and went into liquidation.

By her writ and statement of claim the plaintiff claimed against the first defendants to rescind the conveyance of the property on the ground of fraudulent misrepresentations as to the status of the tenant, and also claimed against both defendants damages for deceit, the misrepresentations being contained in the letters of September 1 and 3, 1965, from the second defendants to Grace Rymer and in the enclosed bank reference. The defendants denied that there had been any misrepresentations or that they had been fraudulent.

In his judgment Russell L.J. said:

"The representations alleged as false were: (1) That H. G. Somers & Sons Ltd. was an old-established company: whereas it had been

dormant for some years. (2) That it was a respectably constituted company: but Colonel Sinclair agreed that that phrase meant nothing. (3) That it had a paid-up capital of £5,000: whereas all its paid-up capital had disappeared. (4) That it had a business of wools, textile goods and clothing with retail branches at Liverpool, Blackpool and Southport: whereas it did not begin to trade until October, 1965. (5) That it was able to pay a rent of £3,000 per annum for certain other premises: whereas it was not so able.

"As to (1), the only statement was the true statement as to the date of incorporation, and, in my judgment, this is not the equivalent of a representation that it had traded continually since then, or that it was not a dormant company on the point of revival." [He did not deal with (2), because it was common ground that "respectably constituted company" was a meaningless phrase.]

"As to (3), admittedly the statement that H. G. Somers & Sons Ltd. had a paid-up capital of £5,000 was false - as false as the same statement by Mr. J. Marshom to the bank manager. But as I have already indicated I accept Mr. James' evidence that he had no knowledge that the capital had been made away with by the former shareholders, but thought the contrary, and I, therefore, acquit him of making this false representation, either knowing it to be false or reckless whether it was true or false.

"As to (4), the only statement was that H. G. Somers & Sons Ltd. had retail branches at those three centres. The situation at the time the letter was written was this: By August 26, Mr. James and the Marshoms had already agreed to a lease of 607 Smithdown Road, Liverpool, and of 509/511 Lord Street, Southport "[and he referred to certain letters].

"By August 31, it had been agreed that the underlease of 1 Birley Street, Blackpool, should be granted not to Twenty Mills Clothing Ltd., but to H. G. Somers & Sons Ltd." [and he referred to another letter].

"Mr. James in making these statements was assuming (correctly as it happened) that all these matters would go through as expected, just as he did when in the same letter he stated that 93 Castle Street, Edgeley, 'has been let,' though technically the lease was still in negotiation. In my judgment, there was nothing fraudulent in these statements, and even if they could technically be described as false at the time they were made, they could not be so described at the time when the contract for sale of 93 Castle Street was exchanged, still less when the sale was completed.

"As to (5), it was admittedly false to represent that H. G. Somers & Sons Ltd. was able to pay a rent of £3,000 per annum, but as I have already indicated I acquit Mr. James of the charge of knowing that it was false or being reckless whether it was true or false."

The judge accordingly held that there had been no fraudulent misrepresentation and dismissed the plaintiff's action. The plaintiff appealed on the grounds that the judge's construction of the letters of September 1 and 3, 1965 was wrong in law and that his finding that the defendants were not

fraudulent or reckless was against the weight of the evidence. By a respondent's notice the defendants sought to uphold the judgment on the additional ground that, in any event, the representations not having been made to the plaintiff, she could not rely on them.

A. J. Balcombe Q.C. for the plaintiff. Three questions arise on the appeal. First, were the representations contained in the two letters of September 1 and September 3, 1965, false? Secondly, did the defendants through James know that they were false, or make them recklessly? Thirdly, assuming that they were fraudulent misrepresentations, can the plaintiff rely upon them?

The first two questions should be considered together. The judge erred in his construction of the two letters. His major error was in failing to read the two letters together and in considering each of the five representations relied upon in isolation from one another and not as a whole. Had he read and considered the two letters together he must have found on their true construction that they gave a false impression, namely that the business being carried on at the Stockport shop was a prosperous business being carried on by an old established company which had been trading since 1928. Instead, the judge wrongly considered the five representations in isolation, but even so he erred in his findings in respect of them. There were five false representations: (a) that H. G. Somers & Sons Ltd. had been incorporated in June, 1928, thus implying that it was an old established company; (b) that it was a respectably constituted company; (c) that it had a paid-up capital of £5,000; (d) that it had a business of hosiery, wools, textile goods and clothing and had retail branches at Liverpool, Blackpool and Southport; (e) that it was able to pay a rental of £3,000 per annum in respect of other premises.

As to (a), the judge held that the statement that the company was incorporated in 1928 was true and, therefore, there was no misrepresentation. But by omitting to state that a company incorporated in 1928 had not traded for the past 30 years the letter gave the false impression that it was an old established company which had been carrying on business for a long time. The principle appropriate here is suppresso veri suggestio falsi. A representation can be false, even where everything which is stated is true, if it conceals matters which gives to the truth a different character: see per Lord Chelmsford L.C. in Oakes v. Turquand and Harding (1867) L.R. 2 H.L. 325, 342. Although the letter was true so far as the date of incorporation was concerned, it concealed a most material fact the omission of which gave to the truth which was told the character of falsehood. A partial statement of facts can still be false if that which is not stated makes false that which is stated: see per Lord Cairns in Peek v. Gurney (1873) L.R. 6 H.L. 377, 403. The principle there stated was applied in Arkwright v. Newbold (1881) 17 Ch.D. 301.

As to (b) no weight was placed below on the representation that it was a respectably constituted company and nothing turns on this.

As to (c), the representation that the company had a paid-up capital of £5,000 was admittedly false and the question was whether James knew of its falsity. That turned on whether he was present at a particular

meeting on which point the judge came to a wrong conclusion on the facts.

As to (d), the judge held that the representation that the company was carrying on business at other retail branches was true. It was certainly not literally true at the time the letter was written, although it was true at the time that contracts were exchanged. When someone says that a company has a retail branch, he means that it has a business going on and not that it has empty premises at a place where it proposes to start a business. When the letter was written there were no retail branches in the sense of a business being carried on in them. The effect of the representation at the time it was made was to give the false impression of an old established prosperous company with an active business being carried on in a number of retail branches.

As to (e), the representation that the company was able to pay a rental of £3,000 per annum was admittedly false, and the question again was whether James knew that it was false. On that issue the judge again came to a wrong conclusion on a question of fact.

The question arises as to the power of an appellate court to find a person guilty of fraud when a judge of first instance who has seen and heard him has acquitted him of fraud. Where the question at issue is the proper inference to be drawn from facts which are not in doubt or from documents which are not in dispute, the appellate court is in as good a position to decide the question as the judge at the trial: Powell v. Streatham Manor Nursing Home [1935] A.C. 243. On the other hand, where the issue turns on the credibility of conflicting witnesses who have not been seen or heard by an appellate court, it should not interfere with the decision of the trial except in the plainest case: Khoo Sit Hoh v. Lim Thean Tong [1912] A.C. 323. Where an appellate court is convinced that a judge was wrong in acquitting a party of fraud, it is bound to reverse his decision because an appeal to a Court of Appeal is a re-hearing both on fact and on law: Yuill v. Yuill [1945] P. 15. Furthermore, an appellate court can reverse the decision of the judge where the reasons he has given for his decision for accepting one witness rather than another are unsatisfactory or where he has not taken proper advantage of seeing the witnesses who appeared before him: see per Lord Thankerton in Watt (or Thomas) v. Thomas [1947] A.C. 484, 488.

Applying those principles to the present case, the Court of Appeal is as well qualified as the judge to say what the two letters here mean. Whether the letters suggest when read together that there was an established going concern being carried on by H. G. Somers & Sons Ltd. is purely an objective matter depending on their true construction. Assuming that the letters gave that false impression, the next question is whether their author wrote them with an intent to deceive. As to that, there was no finding of fact by the judge because that question never arose. Therefore, the question whether the letters were written with an intent to deceive is at large and the Court of Appeal is free to look at all the evidence and decide on the balance of probability what was meant by James when he wrote them. It is an irresistible inference that he meant to give a false

impression to a prospective purchaser that H. G. Somers & Sons Ltd. was an old established going concern.

Alternatively, if the Court of Appeal is satisfied that the trial had been conducted unsatisfactorily or that it was an unsatisfactory trial but is not satisfied that the judge was wrong, it can order a new trial: R.S.C., Ord. 59, r. 11. If that is the position, the plaintiff seeks a new trial on the issue of fraud.

If the defendants were guilty of fraudulent misrepresentations, the plaintiff is entitled to set aside the conveyance. She is entitled on three separate grounds. First, she was within the class of persons to whom the representations were made. The letters were not just addressed to an individual, but to any person whoever who might have been interested in a purchase of the Stockport shop. Secondly, she was a direct representee by reason of the answers to the requisitions on title. Thirdly, the right of rescission is an equitable right which runs as an equity with the land, so that once the contract to Grace Rymer Ltd. was made it was subject to an equitable right of being rescinded for fraudulent misrepresentation, and such an equitable right passes with the property.

As to the first ground, it is not necessary that the representation should be made directly to the party who relies on it, for it is sufficient if it is made to a third person to be communicated to the plaintiff or it is made to a class of persons of whom the plaintiff might be one: Swift v. Winterbotham (1873) L.R. 8 Q.B. 244. In a previous transaction some months before Grace Rymer Ltd. had dealt with James and the contract had been taken by the plaintiff. Therefore, the identity of Grace Rymer Ltd. was not a material factor. The true inference was that the letter was addressed to the purchaser of the property whoever he might be. James should have realised when he wrote the letter that it was not merely for the benefit of Grace Rymer Ltd., but for the benefit of anybody who might be introduced through that company. He knew that they were dealers in property and knew also that on at least one other occasion they had negotiated for the plaintiff. Therefore, when the letter says "this may be of interest to you" it means "you" or any person you represent. Accordingly, the plaintiff was within the class of persons to whom the representation was addressed and, therefore, she can rely upon it. Moreover, he must be taken to have assumed that the representations in the letter would have been passed on to the plaintiff where he knew that she would take the benefit of the contract.

As to the second ground, the plaintiff can rely upon the answers given to the requisitions on title. The defendants' solicitors had the normal authority to answer requisitions on title. Reliance is placed upon requisition no. 2 in respect of preliminary enquiry no. 42: "if copy references not already supplied to your client, please confirm that these are satisfactory." The answer was: "references already supplied." By requisition no. 2 the defendants confirmed that answer to preliminary enquiry no. 42. In its context that answer could refer only to the existing references which had been given. Therefore, the false representations contained in the bank reference were made direct to the plaintiff through her solicitors.

A principal is liable for information given by an agent within the scope of his authority, and even if the agent was innocent of making a false representation, yet if the principal knew it to be false he is liable: Armstrong v.

Strain [1952] 1 K.B. 232. An innocent misrepresentation by an agent can constitute fraudulent misrepresentation by the agent's principal if the principal knows that the misrepresentation is false, provided that the agent has been authorised to transmit the information: see per Scrutton L.J. in Woyka & Co. v. London & Northern Trading Co. Ltd. (1922) 10 Ll.L.R. 110, 114, where he distinguished Cornfoot v. Fowke (1840) 6 M. & W. 358 on the ground that the agent there was not authorised to transmit the information.

As to the third ground, the right to set aside a contract induced by fraud passes to an assignee of the benefit of the contract. The effect of the direction by Grace Rymer Ltd. to the defendants to have the contract transferred to the plaintiff was to assign the benefit of the contract to the plaintiff. There passed with that assignment the right to set aside the contract for fraudulent misrepresentation: see Halsbury's Laws of England,3rd ed., Vol. 26 (1959), p. 880, para. 1633, and Pilmore v. Hood (1838) 5 Bing.N.C. 97, which establishes that if a misrepresentation is made to A, and the property is conveyed to B, and the vendor knows that the misrepresentation has been passed on to B, B has a right to set aside the conveyance. It was on this ground that an assignee of the benefit of the contract was held entitled in Wilson v. Short (1847) 6 Hare 366 to set aside the contract for fraud. The same principle was applied in Dickinson v. Burrell (1866) L.R. 1 Eq. 377. Both these cases are relied upon for the proposition that a right to set aside a conveyance for fraud is an equity which passes with the property and cannot be excluded unless it is a bare right to litigate. Rescission is an equitable remedy because it was only in courts of equity that accounts could be taken, which was a necessary condition for achieving restitutio in integrum: Erlanger v. New Sombrero Phosphate Co. (1878) 3 App. Cas. 1218.

Raymond Walton Q.C. and P. J. Millett for the defendants. The judge was right in holding that the five representations relied upon were not false, or, if false, that James did not know that they were false. As to the representation about the date of incorporation, the letter was true in what it said because June 11, 1928, was the date of incorporation. The further representation that the company had carried on business since cannot be implied from the mere fact that the date of incorporation was in June, 1928. Anyone making a company search would have found the same information, but would have been most unwise to have assumed that every company which has been incorporated at a particular date has carried on trading since that time. Furthermore, James did not intend the representation to be so taken.

As to the representation that the company was respectably constituted, nothing now turns on it. As to the representation that it had a paid-up capital of £5,000, that was admittedly false, but the judge held for good reasons that James did not know that it was false and there is nothing to show that the judge was wrong. As to the representation that H. G. Somers & Sons Ltd. had other retail branches, which in a literal sense was not true because the leases for the other shops had not yet been completed, it must be remembered that James was using the present tense proleptically. He took what was quite certain for the future as happening

now nunc pro tunc. Although the negotiations for the leases had not yet been completed, it was certain that the company would obtain those leases, open retail branches and carry on business at those shops. As to the representation about the ability to pay a rental of £3,000 per annum, there is no evidence to show that James knew that to be a false statement.

An appellate court should always be very slow to reverse a trial judge who has seen and heard the witnesses on an issue of fact which depends upon conflicting testimony: Watt (or Thomas) v. Thomas [1947] A.C. 484. Unless fraud is to be very clearly inferred from undisputed documents, an appellate court should not find someone fraudulent if the trial judge who has seen and heard him has acquitted him of fraud: Glasier v. Rolls (1889) 42 Ch.D. 436.

In order to find a fraudulent misrepresentation here it is necessary to find not only that the representation was false, but also that James intended it in a fraudulent sense: Akerhielm v. De Mare [1959] A.C. 789. The person making the fraudulent misrepresentation must have had a mens rea and a misrepresentation is not fraudulent simply because it is made by someone who was hopelessly inaccurate or careless: Derry v. Peek (1889) 14 App.Cas. 337. An honest blunder in the use of language does not amount to fraud, and if the person who makes the false statement entertains the honest belief that it is true, there can be no deceit: Angus v. Clifford (1891) 2 Ch. 449.

James knew nothing about H. G. Somers & Sons Ltd., relied on the bank reference and in writing the two letters which have been relied upon by the plaintiff passed on information which he thought might be useful to prospective purchasers and which could have been obtained from the combination of a company search and bank references. Having been acquitted of fraud by the trial judge the Court of Appeal should be exceptionally slow to find that he was fraudulent, especially since he did not write the letters in a fraudulent sense.

P. J. Millett following: Even if the defendants were guilty of fraudulent misrepresentations, the plaintiff is not entitled to rely upon them. Two requirements have to be fulfilled by a plaintiff in an action for fraud. First, the plaintiff must prove that as a question of fact he has relied on the misrepresentation made by the defendants, and, secondly, he must prove that the representation was such that in contemplation of law it was made to him. In the present case the plaintiff has not established that she relied on any misrepresentation made by the defendants as a question of fact, nor was it in contemplation of law made to her.

As to whether she factually relied on any misrepresentation made by the defendants, the plaintiff herself never gave evidence. She was not called to say that she relied on the statements contained in the letters. There is no evidence that she ever saw them, and the highest that her case can be put is that she relied on the recommendations of Grace Rymer Ltd. If someone is prepared to act on the recommendation of a professional adviser without seeing the material on which the professional adviser has acted, he takes the risk that his adviser may have been affected by a misrepresentation. Grace Rymer Ltd. having entered into the transaction on their own behalf merely made a sub-sale and were not acting for

the plaintiff. It is not correct to describe the direction to take a conveyance in the plaintiff's name as an assignment of a contract or benefit of a contract, for it was strictly a sub-sale. Grace Rymer Ltd. were to receive a commission of two and a half per cent. on the purchase price, which was their profit, and the true view of the transaction was that they were making a sub-sale to the plaintiff of property which they had contracted to purchase.

If the original representee passes on a representation to a third party to the knowledge of the original representor, it becomes the original representor's representation and he can be sued by the third party as if he had made that representation direct to the third party: Pilmore v. Hood, 5 Bing. N.C. 97, which is distinguishable because here the representation was not passed on to the knowledge of James. But if the original representee sells the property to a third party without passing on any representation made to him, there is no cause of action either by the original representee or by the third party. Likewise if the original representee sells to the third party and at the same time passes on a representation made to him without the knowledge of the original representor; for it is not the same representation as made to the original representee, but is a new representation made by the original representee. The original representee then cannot set aside the conveyance without impeaching the subsequent sale to the third party, and similarly the third party cannot set it aside against the original represent or without impeaching the intermediate sale: Edinburgh United Breweries Ltd. v. Molleson [1894] A.C. 96. The House of Lords there decided that where a party seeks to set aside a conveyance for fraudulent misrepresentation the ultimate purchaser cannot set it aside as against the original vendor unless the ultimate purchaser can set it aside as between himself and his immediate vendor. But here the plaintiff could not set aside the conveyance as against Grace Rymer Ltd. because they never made any representation to her nor were they fraudulent. All that they did was to recommend the purchase of the property to her as a suitable investment; but that cannot be a ground of liability. Therefore, the plaintiff cannot set aside the conveyance here because she is unable to set it aside as against Grace Rymer Ltd.

The representations were not in contemplation of law made to the plaintiff. First, she was never in contractual relationship with the defendants. Secondly, James did not know and could not have reasonably contemplated that Grace Rymer Ltd. would be acting for another person. He simply dealt with Grace Rymer Ltd. as the intending purchasers and, as far as he was concerned, they were buying for themselves. The present case, therefore, is not the same as where representations are made to a stockbroker or estate agent who one knows acts for clients and Swift v. Winterbotham, L.R. 8 Q.B. 244 is distinguished because there the representation was made to a known agent of the party who was deceived. Thirdly, the representations were given and made to Grace Rymer Ltd. as the principals. Fourthly, the defendants' liability was to convey to Grace Rymer Ltd. or such persons as they should direct. The defendants had no right to demur when called upon to convey to the plaintiff or even to enquire what the position was. Grace Rymer Ltd. could have been acting

for an undisclosed principal or they could have been acting as principals and have asked that the conveyance be put in the name of nominees.

Reliance is placed on Peek v. Gurney, L.R. 6 H.L. 377, where it was held that a subsequent purchaser from an original allottee of shares, who was induced to take them because of a fraudulent prospectus, could not rescind since the representation was not in contemplation of law made to the subsequent purchaser. That was a strong case because the prospectus was addressed to the public. Nevertheless the House of Lords held that the representations in the prospectus were made only to the original allottees, and once the allotment had been made the representations had lost their efficacy. Similarly, once Grace Rymer Ltd. had entered into a contract to purchase, the representations in the letter lost their efficacy.

[Reference was also made to Collins v. Associated Greyhound Racecourses Ltd. [1930] 1 Ch. 1.]

The plaintiff put her case on three grounds. First, that she was within the class of persons to whom the representation was addressed. The answer to that is that she was not within the class of persons to whom the letters were addressed and the representations in the letters never even reached her. This is an a fortiori case to Peek v. Gurney, L.R. 6 H.L. 377, where at least the false prospectus had been seen by the subsequent purchaser of the shares from the original allottee. Secondly, the plaintiff claimed that the right of rescission was an equity which passed with the land. But the authorities do not support that proposition. Wilson v. Short, 6 Hare 366 is distinguishable because there the fraudulent representation was repeated by the intermediate to the ultimate purchaser. Dickinson v. Burrell, L.R. 1 Eq. 377 was the converse case to the present. There the vendor had previously disposed of the legal estate, but had a good claim in equity to receive it. The court held that a conveyance of the land simpliciter passed that equitable interest. If it did not, it passed nothing. But the plaintiff claims that a conveyance passes not only the land employed, but also the right to reject the land, which is absurd. Edinburgh United Breweries Ltd. v. Molleson [1894] A.C. 96 shows that the right of rescission is not an equity which runs with the land. Both Peek v. Gurney, L.R. 6 H.L. 377 and Collins v. Associated Greyhound Racecourses Ltd. [1930] 1 Ch. 1 are inconsistent with such an equity running with the land or other property. The right of rescission was not an equitable interest which attached to the property and, therefore, it did not run with the land.

The plaintiff also relied upon the answers to one of the preliminary enquiries repeated in the requisitions on title. Preliminary enquiry no. 42 was: "if copy references not already supplied to your client, please confirm that these are satisfactory." The answer repeated in the requisition was: "references already supplied." That answer carries the matter no further because it was merely equivalent to "not applicable." References had already been obtained, so that there was no request for confirmation. In any event, the only answer was that the references had already been supplied and that was true. Therefore no relevant representation was made at all by the answers to the preliminary enquiries or to the requisition on title.

If the plaintiff cannot rely upon the misrepresentations, there is, in any event, no point in having a new trial on the issue of fraud.

Balcombe Q.C. in reply. James must have contemplated when he wrote the letters that Grace Rymer Ltd. alone might not act on it, but might recommend the property concerned as a suitable investment to one of their clients. It would be a remarkable position if there were to be no liability for misrepresentation because it had been made to an agent and transmitted to the agent's client by way of recommendation. The proper test is: did the representation have its effect on the mind of the purchaser?; if it did, it does not matter whether the representation was made to the plaintiff or to her agents, provided the chain of causation was not too remote: see perLord Cairns in Peek v. Gurney, L.R. 6 H.L. 377, 412.

Edinburgh United Breweries Ltd. v. Molleson [1894] A.C. 96 is distinguishable because that was a case of a sub-sale. The decision was that where there is a sale and a sub-sale the sub-purchaser cannot set aside the sub-sale unless he can also set aside the sale. The reason is because unless he can set aside the sale, there cannot be restitutio in integrum, which is a necessary condition for rescission, in that the intermediate purchaser would keep his profit. That case was thus explained by the House of Lords in the latter case of Abram Steamship Co. Ltd. v. Westville Shipping Co. Ltd. [1923] A.C. 773, in particular by Lord Dunedin at p. 779. The Molleson case has nothing to do with the present case because here there is no subcontact which needs to be set aside.

Although the equity of rescission runs with the property it is exercisable only if there can be total restitution. It is necessary to upset all intermediate transactions in order to achieve total restitution and that is why it is impossible in most cases to rely upon the equity of rescission. Wilson v. Short, 6 Hare 366 has been distinguished on the ground that the representation there was repeated by the intermediate purchaser, but on analysis that was not the ratio decidendi.

It is accepted that only the person to whom a representation is addressed can rely upon it. The decision in Peek v. Gurney, L.R. 6 H.L. 377 was only that the prospectus was addressed in the circumstances of that case to the original allottee. Compare Andrews v. Mockford (1881) 17 Ch.D. 301 where the prospectus was intended for buyers on the open market. The reason why the undisclosed principal in Collins v. Associated Greyhound Racecourses Ltd. [1930] 1 Ch. 1 could not rescind the contract was because there the identity of the addressee was a material factor. But in the present case the identity of the purchaser was not a material factor and James merely wanted someone who would purchase the land. He was addressing this representations to a class of prospective purchasers of whom the plaintiff was one. The misrepresentation here had not fulfilled its work until the purchase price was paid: James would not have been satisfied merely with someone who signed a contract to purchase; he wanted someone who would complete the purchase.

HARMAN L.J. I will ask Cross L.J. to deliver the first judgment.

CROSS L.J. stated the facts and continued: The judge did not read the two letters together, and dealt with the representations in them as to the date of incorporation and the possession of other retail business outlets

separately. He was thus able to treat the statement that the company was incorporated in 1928 as a true though irrelevant statement, and to treat the statement that the company had retail branches in other places as a statement which, although strictly speaking untrue when made, became true and harmless a few weeks later when the leases were granted. But, in my judgment, the recipient of those letters was fully entitled to read them together - as, indeed, Colonel Sinclair said that he did - and to believe that H. G. Somers & Sons Ltd. was a going concern. What the letters and reference together said was that it had been trading successfully through several outlets for a number of years, that it had capital assets worth at least £5,000 (possibly of course much more), and that its bankers considered from their experience of it as a customer that it was able to pay a rent of £3,000 a year for one of its shops. Those statements were almost wholly untrue. The company, although it had been incorporated in 1928, had not done any business for 30 years. It had not yet started its new contemplated trade, and had no assets of any sort.

But, before a purchaser under a completed purchase of real property can set aside the conveyance to him for misrepresentations, he must show that the misrepresentations were fraudulent.

The judge, who saw and heard James, the Marshoms, Rushton (the accountant for H. G. Somers & Sons Ltd.) and Youngs, said that he preferred the evidence of James to that of the Marshoms wherever they were in conflict. He believed James when he said that he did not know that the company had no capital assets, and that he assumed that Youngs had made enquiries as to its financial position and as to the financial position of those who were to run it before he gave the reference. He does not say in terms that he considered James to be in all respects a witness of truth, but it is the natural inference from his judgment that he did so regard him.

A Court of Appeal is not entitled to disturb findings of fact made by the trial judge, which depend to any appreciable extent on the view that he took as to the truthfulness or untruthfulness of a witness whom he has seen and heard, and the Court of Appeal will not do so unless it is completely satisfied that the judge was wrong. It is not enough that it has doubts, even grave doubts, as to the correctness of the judge's finding. It must be convinced that he was wrong.

[His Lordship considered the evidence and continued:]

Finally, I come to the representation that the company was a "going concern," which was made if one reads the two letters together, as I think one should. If James intended the letters to convey the impression that the company was a going concern, or was willing that a recipient should get that impression, clearly he was guilty of fraud, because he knew very well that it was not a going concern. But although that is, in my view, the impression that the letters read together would naturally create, James cannot be held guilty of fraud unless he intended or was willing that they should be read in that way. That appears clearly from Angus v. Clifford [1891] 2 Ch. 449 and from the Privy Council decision of Akerhielm v. De Mare [1959] A.C. 789, 805, 806.

I have considered as fairly as I can the points which are urged against the judge's finding that James was not guilty of fraud and the considerations

- apart from the impression which James himself made as a witness - which may be said to tell the other way. Can I say I am convinced that the judge was wrong? I am certainly very far from satisfied that he was right. Indeed, considering only the material before us, I would say that he was probably wrong. But it is a very strong thing for an appellate court to hold guilty of fraud a man whom the judge of first instance, who saw and heard him, held to be honest, and I do not myself feel that degree of conviction that the judge was wrong which would justify me in taking that step.

Counsel for the plaintiff asked that, in the event of our not reversing the judge's finding on the fraud point, we should at least order a fresh trial. That is a point to which I will return after considering the question with which the judge did not deal, namely, whether, even if the misrepresentations were fraudulent, the plaintiff would be entitled to rely on them. On that point one must remind oneself of the relevant facts. Grace Rymer did not contract with James as agents for the plaintiff but as principals, and having become the owners of the property in equity under the contract Alfred to sell it to her for the same price if she paid Grace Rymer a commission. That offer was revocable by Grace Rymer at any time down to the moment when she accepted it on November 19 by paying the purchase price and taking a conveyance from the first defendants. James' solicitors became aware that the plaintiff was going to be the ultimate purchaser when her solicitors sent them the requisitions on title; but the judge found that James himself did not know of that and, therefore, did not know that she was the purchaser until he actually signed the conveyance as one of the directors of the first defendants.

Counsel for the plaintiff put his case on this point in two ways. One was that Grace Rymer's right to rescind the contract was attached to the equitable interest in the property which it acquired under the contract and passed to the plaintiff when that equitable interest vested in her on completion of the purchase. In my judgment, the right to rescind for misrepresentation does not run with the land in that way. If A. induces B. to buy land by means of fraudulent misrepresentations, and B. in turn sells the land to C. - whether for a higher or a lower price - then, if C. is able to and does set aside his contract with B., B. can rescind against A., but C., as I understand the law, has no right to rescind as against A. on handing back the land to A. and being repaid by A. the price which B. paid him. So much appears to me to emerge from Edinburgh United Breweries Ltd. v. Molleson [1894] A.C. 96. In the present case there was no separate contract or conveyance between Grace Rymer and the plaintiff, since her acceptance of Grace Rymer's offer was effected by her paying the purchase price to and obtaining a conveyance from the first defendants. But it would be very odd if it made a difference that Grace Rymer had not entered into a contract of subsale with the plaintiff. Counsel sought to support his contention that a right to rescind for misrepresentation runs with the land taken by the original representee by reference to Dickinson v. Burrell (1866) L.R. 1 Eq. 337. But that was a different sort of case. There, property had been assigned by A. to B., in circumstances which, so it was claimed, gave A. an equitable right to recover it and so an equitable interest in it. A. assigned that equitable interest to C., and it

was held that C. could sue B. to recover the legal estate. That case does not appear to me to support the proposition advanced by counsel in the present case. Here, the assignee is not claiming to recover an equitable interest in the property previously conveyed away by his assignor, but is claiming to throw back the property assigned to him not on his immediate assignor but on the party who sold it to his assignor. So that point, in my judgment, fails.

The second way in which counsel put this part of his case was that the representations can be taken as having been made not only to Grace Rymer, but also to the plaintiff. Mr. Millett, for the defendants, sought to counter that argument by submitting that the plaintiff was not within the class of persons to whom the representations were originally made, and that, in any case, she did not rely on the representations as such but only on a recommendation of Colonel Sinclair, transmitted to her by Mr. Kramer, her solicitor, which had been induced by the misrepresentations.

I am not myself prepared to accept either of these contentions. Having regard to James' knowledge of Grace Rymer's business, and, in particular, the recent sale of the property at Horsham to the plaintiff, which had been negotiated by Grace Rymer, I think that the words "which may be of interest to you" in the letter of September I can well be read against James as including "or any client of yours to whom you may care to introduce the property." Again I am not prepared to hold that, if a layman asks an expert dealer in some class of property to find a suitable investment for him on a commission basis and the expert, having been misled by fraudulent misrepresentations by the vendor, recommends a certain purchase and in reliance on the recommendation the layman purchases the property, the vendor can rely on the fact that the actual misrepresentations as such were not communicated to the purchaser but only the recommendation of the expert which had been induced by them. I think that the law would be in a very unreasonable state if that were so.

So in the present case, if the plaintiff, acting on Colonel Sinclair's recommendation, had herself contracted with James to buy the property, it may very well be that she could have rescinded the sale after conveyance if the misrepresentations made to Grace Rymer were fraudulent. But Grace Rymer itself agreed to buy the property, and that, as I see it, makes a very great difference. Assuming that the plaintiff was within the class of persons to whom the representations were originally made, she fell out of the class when Grace Rymer agreed to buy the property. The original representations were spent, and Grace Rymer thereafter dealt with her as owners in equity of the property who were prepared to let her take it over for a commission. She could no doubt have relied on the misrepresentations if James or some agent of his had repeated them to her or some agent of hers. Again, if James had known that Colonel Sinclair was handing on his bargain to the plaintiff and was repeating to her the misrepresentations which he (James) had made to him and he stood by and allowed her to complete the purchase from him without disillusioning her, she might well have been able to rescind. It would have been such a case as Pilmore v. Hood (1838) 5 Bing.N.C. 97. But nothing of that sort happened here.

In this connection, Mr. Balcombe sought to rely, rather faintly, on the answer which Clintons gave to Kramer's second requisition; but, in my

judgment, there is nothing in this point. Clintons were no doubt James' agents to answer requisitions; but all that they said was that James would give the same answer, on November 5, to the questions asked in the preliminary inquiries as they gave to them on September 16. Their answer to the preliminary inquiry was not that they considered the references to be satisfactory, but simply that the references had been supplied to Grace Rymer. The repetition of that answer to Kramer as the solicitor for the plaintiff did not carry the matter any further. Accordingly, in my view, even if the misrepresentations made by James to Grace Rymer were fraudulent, she could not rescind the conveyance on account of them.

Counsel for the plaintiff asked that, in the event of our being unwilling to reverse the judge's finding on the fraud point, we should at least order a new trial on that issue. He conceded, however, that, if we were against him on the second point, the question of a new trial would not arise. Accordingly, in my judgment, this appeal should be dismissed.

HARMAN L.J. I agree. Cross L.J. has covered the ground so fully that I have only very few words to add. [His Lordship stated the facts and continued:] Four misrepresentations were eventually relied upon: they are set out in the judgment. "(1) That H. G. Somers & Sons Ltd. was an old-established company: whereas it had been dormant for some years." You must connect that with 4, which says "that it had a business of wools, textile goods and clothing with retail branches at Liverpool, Blackpool and Southport: whereas it did not begin to trade until October, 1965."

The judge took those two representations as two entirely isolated matters. He said as to the first: It is true that Somers was an old-established company, and that does not represent anything but the fact that it was an old-established company. It is true, he says - not quite true but nearly true - that it was about to start business at Liverpool, Blackpool and Southport; and it was never apparently questioned by the judge, at any rate he never canvassed the question, whether if you take those two suggestions together, you come on a quite clear representation that this is an old-established company having business of an established kind in these three places and which is opening up in a new place. That is the real misrepresentation that was made here. If the judge had had that put to him, I know not what answer he would have made to it.

That is the crux of the accusation against Mr. James that he by those two letters intended to produce exactly the effect which in fact he did produce. That is really the question to be answered. It is said on the authority of Akerhielm v. De Mare [1959] A.C. 789, P.C., that it is not legitimate for the Court of Appeal to construe the representations as it thinks they ought to be construed: what it must do is to construe them as the maker of them would have represented them to be. It is said that, if you look at them in that way, you cannot assume that, although reading them fairly now we see quite clearly that they are gross misrepresentations, Mr. James would have seen at the time that they were. I cannot take that view because of the evidence of Mr James.

[His Lordship considered the evidence and continued:]

Therefore, if it had been for me to decide, I would have decided that Mr. James was telling the untruth of which the judge acquitted him. But

it seems to me that the last word in that matter has been said by Lord Greene M.R., in Yuill v. Yuill [1945] P. 15 where he said, at p. 19:

"We were reminded of certain well-known observations in the House of Lords dealing with the position of an appellate court when the judgment of the trial judge has been based in whole or in part on his opinion of the demeanour of witnesses. It can, of course, only be on the rarest occasions, and in circumstances where the appellate court is convinced by the plainest considerations, that it would be justified in finding that the trial judge had formed a wrong opinion. But when the court is so convinced it is, in my opinion, entitled and indeed bound to give effect to its conviction. It has never been laid down by the House of Lords that an appellate court has no power to take this course. Puisne judges would be the last persons to lay claim to infallibility, even in assessing the demeanour of a witness. The most experienced judge may, albeit rarely, be deceived by a clever liar, or led to form an unfavorable opinion of an honest witness, and may express his view that his demeanour was excellent or bad as the case may be. Most experienced counsel can, I have no doubt, recall at least one case where this has happened to their knowledge. I may further point out that an impression as to the demeanour of a witness ought not to be adopted by a trial judge without testing it against the whole of the evidence of the witness in question."

I have read through the whole of Mr. James' evidence in the transcript - an advantage which the judge did not have - and, in my judgment, when you read the whole of it through one comes to the view that Mr. James was a most unsatisfactory witness. I would, therefore, not acquit him of meaning those two letters in the sense which they undoubtedly bear and of being guilty of fraudulent misrepresentation. But that misrepresentation was not made to the plaintiff: it was made to Grace Rymer, who were themselves the persons who entered into the contract to purchase the property. It was, therefore, they who relied on the representation and not the plaintiff. They communicated to her the result of the information they had received and she bought on their recommendation. The pleadings show quite clearly that that is what the case was. Grace Rymer was the contracting party and, as the representation was undoubtedly made to them, it seems to me that that is as far as the matter goes and you cannot carry it any further - because, as Lord Cairns said in Peek v. Gurney (1873) L.R. 6 H.L. 377, 411: where are you to stop? The representation is made to A.; A. buys on the strength of it; and the fact that it goes further down the line ad infinitum does not mean that everybody who comes to know of it can rely on it. As Cross L.J. said, when the contract is made with A. the effect of the misrepresentation is spent; and, therefore, on this subject I find it necessary to come to the conclusion that the plaintiff cannot succeed, even though the representation was false to the knowledge of the maker of it. Therefore, the appeal cannot succeed, and I would agree that it ought to be dismissed.

WIDGERY L.J. I agree that this appeal must be dismissed. If I endeavoured to cover the ground as fully as it was covered by Cross L.J.

the resultant differences between my judgment and his would be found to be matters of degree and emphasis only and not differences of principle.

It is true that an appellate court, such as this, which sees only the transcript and does not see the witnesses, must hesitate for a very long time before reaching a conclusion different from that of the trial judge as to the credibility or honesty of a witness. It was very properly urged upon us here by Mr. Balcombe that there are considerations which may lead the appellate court to take a different view on the honesty of a witness. He indicated particularly that there were discrepancies in the evidence of Mr. James and he said, quite rightly, that the existence of such discrepancies is one of the matters which may justify the appellate court in interfering with the finding of the judge below. My view of this case having read the evidence of Mr. James with care, is that I see no reason whatever to think that the judge's view should be set aside. Mr. James discloses certain characteristics which make him a bad witness. It is, I think, a commonplace that, when a witness is charged with a serious offence, whether it be in a criminal court or a civil court, he may show reluctance to answer a question. Such a witness, when asked questions which he cannot really answer, thinks that he must say something to "fill in" and puts forward a combination of recollection and supposition. When he is asked the same questions several times he produces different answers because his suppositions are different each time and he forgets what the supposition was on the previous occasion. Such conduct on the part of a witness stamps him as unreliable in regard to the matters in respect of which he contradicts himself, and such conduct may well be an indication of a liar, because one of the clearest badges of a liar is that he tells different stories at different times. On the other hand, it is a very common experience for witnesses faced with serious charges to commit themselves to answers with insufficient care and possibly with insufficient candour to say "I do not know." It is also quite a usual experience for the judge or tribunal of first instance to be able to pick out, nevertheless, the difference between a man who is lying and a man who is merely "filling in" in this way.

I consider this to be a case in which the judge, recognising the deficiency of Mr. James as a witness, was still able to see, in appropriate answers, that where he did know the answer he gave it, and gave it with such honesty as would justify the view which was expressed below. [His Lordship referred to the evidence, and continued:]

In the end, I have no hesitation in saying that I would not regard the judge's view of Mr. James as being one which we ought to depart from in this court. I fully recognise that what Harman L.J. has described as the real sting of this misrepresentation does not seem to have been in the judge's mind at all. Like my brothers, I think that the real vice of this representation is seen by reading Mr. James' two letters together and seeing the combination of the information which they contain. When one reads the two letters in that way, undoubtedly they suggest to the ordinary reader that this was an old established company with three retail branches which were going concerns, and if Mr. James had applied his mind to that point, he could not have failed to realise that such information was utterly false. The question is, did he apply his mind to that, and can it be said

that he made this Statement with intent to deceive or that he made it dishonestly? I find it quite impossible to say so.

I have considered in the course of the argument Whether a new trial might have been appropriate on this point, because it is a matter on which we have not had assistance from the judge; but my view of Mr. James at the end of it all is that he is not the Sort of man who worries too match about what he wrote last week when writing a letter this week. I am not endeavouring to pay him a compliment - rather the reverse. But the careless and lax attitude in which he approached the business is something which fails a very long way short of fraud. I am not impressed with the argument that Mr. James must have considered those letters together in his own mind, and thaws have appreciated the effect which they might have in combination. Mr. Walton put it very well when he said that the first letter was passing on information which Mr. James had acquired from the Marshoms and the second letter was passing on information which he had acquired, or could have acquired, from a company search; and I can quite well imagine Mr. James writing those letters without appreciating the very clear impression which they conveyed to us. Accordingly, even if this were decisive of the matter, which it is not, I would dismiss the appeal.

So far as the other matters arising on the respondents' notice are concerned, namely the question whether the plaintiffs could have relied on the misrepresentation in any event, I have nothing to add to that which has been said by Cross L.J.

Solicitors: A. Kramer & Co.; Clintons.

N. P.