Smith v Land and House Property Corpn 27 Oct 1884 28 ChD 7, CA

A vendor described a property's tenant as 'most desirable', despite knowing the tenant was in rent arrears. The court held this was not mere opinion but a misrepresentation of fact, as the vendor impliedly stated facts to justify their opinion.

Facts

The plaintiffs (vendors) advertised a hotel for sale, stating in the particulars that it was let to Mr Fleck, ‘a most desirable tenant’. The defendants (purchasers) agreed to buy the property. Before completion, Mr Fleck, who had been struggling to pay his rent and was in arrears, went into liquidation. The defendants discovered this and refused to complete the purchase, arguing they had been misled by the description of the tenant. The vendors brought an action for specific performance of the contract. The defendants counter-claimed for rescission of the agreement and the return of their deposit on the grounds of misrepresentation.

Issues

The central legal issue was whether the description of Mr Fleck as ‘a most desirable tenant’ constituted a mere expression of opinion, which would not be actionable, or a misrepresentation of a material fact, which would entitle the purchasers to rescind the contract.

Judgment

The Court of Appeal, reversing the decision of the lower court, held that the statement was a misrepresentation of fact. The vendors’ action for specific performance was dismissed, and the contract was rescinded.

Reasoning of the Court

The judges unanimously found that the vendors’ assertion was not one of pure opinion because they were in a unique position to know the facts upon which such an opinion should be based. By describing the tenant as desirable, they impliedly represented that they knew of no facts leading to the contrary conclusion.

Lord Justice Bowen delivered the most influential judgment, articulating a key principle in the law of misrepresentation:

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… 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.

Applying this, Bowen LJ concluded that the plaintiffs’ knowledge that the tenant had been in arrears with his rent was wholly inconsistent with the description of him as a desirable tenant. The assertion was therefore an untrue statement of fact.

Lord Justice Baggallay noted that such a statement in the particulars of sale was calculated to influence the purchase, and that a ‘tenant who had paid his last quarter’s rent by driblets under pressure must be regarded as an undesirable tenant.’ Lord Justice Fry concurred, stating that the description was a representation of fact which was, in the circumstances, untrue.

Implications

The decision in Smith v Land and House Property Corporation is a landmark authority on the distinction between opinion and fact in misrepresentation. It establishes the principle that a statement of opinion from a person who has, or claims to have, special knowledge or is in a better position to know the underlying facts, can be treated as a representation of fact. It affirms that such a statement implies that the representor knows facts that support the opinion. This prevents a party with superior knowledge from avoiding liability by couching a false assertion as a mere opinion, thereby providing crucial protection for parties relying on such statements in contractual negotiations.

Verdict: The appeal was allowed. The vendor’s action for specific performance was dismissed and the contract was rescinded.

Source: Smith v Land and House Property Corpn 27 Oct 1884 28 ChD 7, CA