Bisset v Wilkinson [1926] UKPC 1 (20 July 1926)

Facts

The case concerned a contract for the sale of two blocks of land in Avondale, New Zealand, named “Homestead” and “Hogan’s,” from the appellant (vendor, Bisset) to the respondents (purchasers, Wilkinson & Anor). During negotiations, the respondents, who intended to use the land for sheep farming, inquired about its carrying capacity. The appellant, who had not carried on sheep farming on the land as a single unit, stated that he estimated the land, if properly worked and with a good man, would carry 2,000 sheep. The respondents were aware that the appellant had not used the combined blocks for sheep farming. After purchasing the land, the respondents found the statement to be inaccurate and brought an action seeking to rescind the contract on the grounds of misrepresentation.

Issues

The central legal issue before the Privy Council was whether the appellant’s statement regarding the sheep-carrying capacity of the land was a representation of fact or merely a statement of opinion. If it was a statement of fact that proved to be false, it would constitute an actionable misrepresentation entitling the respondents to rescission. If it was a statement of opinion, the conditions under which it could be deemed a misrepresentation were much narrower.

Judgment

The Judicial Committee of the Privy Council, delivering its judgment through Lord Merrivale, allowed the appeal, overturning the decision of the Court of Appeal of New Zealand. The court held that the appellant’s statement was one of opinion, not of fact, and as it was honestly held, it did not amount to a misrepresentation.

Reasoning of the Privy Council

The Board’s reasoning focused on the knowledge of the respective parties and the nature of the statement itself. It was established that the land in question had never been used as a single sheep farm. The appellant had only run some sheep on a portion of the land, a fact known to the respondents. Therefore, any statement about the capacity of the combined and undeveloped blocks was inherently speculative. It was not a statement about a presently existing fact but an estimate of its potential capacity.

Distinction between Fact and Opinion

The judgment provided a critical analysis of the legal distinction between fact and opinion in the context of misrepresentation. Lord Merrivale cited Lord Bowen’s principle from Smith v. Land and House Property Corporation, but distinguished the current case based on the parties’ relative knowledge. He explained the core legal principle:

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 a 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.

Application to the Case

Applying this principle, the court found that the facts were not exclusively known to the appellant. The respondents were aware that the land had not been farmed as a whole for sheep, meaning they knew the appellant’s statement could only be an estimate. As the appellant did not possess special knowledge superior to that of the purchasers, his statement was properly construed as an expression of opinion. The court also found no evidence that the opinion was not honestly held by the appellant. Crucially, the court noted that the respondents had not successfully proven that the farm, if managed properly, was incapable of carrying 2,000 sheep. The statement was therefore not an actionable misrepresentation.

Implications

The decision in Bisset v Wilkinson is a cornerstone authority in contract law regarding the distinction between factual representations and mere statements of opinion. It clarifies that for a statement of opinion to be actionable as a misrepresentation, it must be proven that the opinion was not genuinely held (i.e., it was made dishonestly) or that the person stating the opinion implicitly represented that they had facts to support it when they did not. The case underscores the importance of the context in which a statement is made, particularly the relative knowledge and expertise of the parties. It establishes that where both parties are in a similar position to form an opinion, a statement of this kind is unlikely to be treated as a representation of fact, thereby placing a greater onus on the purchaser to exercise their own judgment.

Verdict: Appeal allowed. The judgment of the Court of Appeal of New Zealand was set aside, the judgment of the trial judge was restored, and the respondents’ claim for rescission was dismissed.

Source: Bisset v Wilkinson & Anor [1926] UKPC 1 (20 July 1926)