At an early period after the respondents went into occupation and commenced their farming operations they round themselves in difficulties. They sought and obtained extensions of time for payment of the interest which fell due to the appellant. Sheep-farming became very unprofitable and they changed their user of the land. One of them withdrew from the partnership. The other made an assignment or the valuable part of his property to his wire, and on being eventually pressed by the appellant for payments under the agreement disclosed this assignment as an answer to the practical enforcement by the appellant, of his demands. The appellant brought his action for a half-year's interest on the unpaid purchase money and the respondents set up their case of misrepresentation.
By their defence and counterclaim the respondents alleged that the appellant had "represented and warranted that the land which was the subject of the agreement had a carrying capacity of two thousand sheep if only one team were employed in the agricultural work of the said land." It was common ground at the hearing and in the Court of Appeal that the carrying capacity of a sheep-farm is its capacity the year round. As was said by Reed J., in the Court of Appeal:
The appellant made these admissions at the hearing: " I told them that if the place was worked as I was working it, with a good six-horse team, my idea was that it would carry two thousand sheep. That was my idea and still is my idea." Further, he said: "I do not dispute that they bought it believing it would carry the two thousand sheep."
The learned judge who tried the action, Sim J., based his judgment in favour of the appellant upon conclusions at which he arrived upon his examination of the evidence, firstly, that the representation made by the defendant was a representation only of his opinion of the capacity of the farm, not a representation of what that capacity in fact was; and secondly, that this representation of opinion was honestly made by the appellant. " It seems to me," the learned judge said, " that the defendants were not justified in regarding anything said by the plaintiff as to the carrying capacity as being anything more than an expression of his opinion on the subject. I am satisfied that what he said was. and still is, his honest opinion on the subject." These conclusions if - warranted by the evidence - were sufficient to dispose of the whole case of misrepresentation, whether as grounding a claim for rescission or a claim for damages. By them the charge of fraud in the pleadings is also specifically negatived. The cause of action founded on alleged warranty which is set up in the defence and counterclaim was, it has been agreed, not asserted at the trial, and the fact is not without bearing on the true effect of the claims which were relied upon.
In the Court of Appeal, as is said in the judgment of Stout C.J., "the real question in dispute turned out to be whether the appellants were entitled to rescission of the contract. They did not rely upon the breach of warranty, but they asked for rescission of the contract, though their claim for damages for misrepresentation had not been formally withdrawn." The learned judges of the Court of Appeal differed in opinion. Reed J. - who thought the appeal failed - dealt with the case upon the contention of the defendants - the now respondents - that the representation made to them by the plaintiff was a representation of fact. He found it to be conclusively established by the defendants' own evidence that, given proper management, the farm was fully capable of carrying at least two thousand sheep. Stout C.J. held that the statement relied upon was made and accepted as a statement of fact. "It would surely be improbable," the learned Chief Justice said, "that when a seller is asked to say what the carrying capacity of his farm is he should not answer the question, but volunteer his opinion or estimate." As to the truth of the representation, the learned Chief Justice said: " The evidence in my opinion is clear that this place never carried all the year round two thousand sheep." He added this, "The respondent allowed the appellants to purchase the farm from him believing that it would carry two thousand sheep, and, therefore, they were misled." Adams J. and Ostler J. alike held that the statement was a representation of fact and was proved to be untrue.
In an action for rescission, as in an action for specific performance of an executory contract, when misrepresentation is the alleged ground of relief of the party who repudiates the contract, it is, of course, essential to ascertain whether that which is relied upon is a representation of a specific fact, or a statement of opinion, since an erroneous opinion stated by the party affirming the contract, though it may have been relied upon and have induced the contract on the part of the party who seeks rescission, gives no title to relief unless fraud is established. The application of this rule, however, is not always easy, as is illustrated in a good many reported cases, as well as in this. A representation of fact may be inherent in a statement of opinion and, at any rate, the existence of the opinion in the person stating it is a question of fact. In Karberg's case [1] Lindley L.J., in course of testing a representation which might" have been as it was said to be by interested parties one of opinion or belief, used this inquiry "\Vas the statement of expectation a statement of things not really expected 1" The Court of Appeal applied this test and rescinded the contract which was in question. In Smith v. Land and House Property Corporation [2] there came in question a vendor's description of the tenant of the property sold as " a most desirable tenant "~a statement of his opinion, as was argued on his behalf in an action to enforce the contract of sale. This description was held by the Court of Appeal to be a misrepresentation of fact, which, without proof of fraud, disentitled the vendor to specific performance of the contract of purchase. "It is often fallaciously assumed," said Bowen L.J.:
The kind of distinction which is in question is illustrated again in a well-known case of Smith v. Chadwick. [3] There the words under consideration involved the inquiry in relation to the sale of an industrial concern whether a statement of "the present value of the turnover or output" was of necessity a statement of fact that the produce of the works was of the amount mentioned, or might be and was a statement that the productive power of the works was estimated at so much. The words were held to be capable of the second of these meanings. The decisive inquiries came to be: what meaning was actually conveyed to the party complaining; was he deceived, and, as the action was based on a charge of fraud, was the statement in question made fraudulently?
In the present case, as in those cited, the material facts of the transaction, the knowledge of the parties respectively, and their relative positions, the words of representation used, and the actual condition of the subject-matter spoken of, are relevant to the two inquiries necessary to be made: what was the meaning of the representation? Was it true?
In ascertaining what meaning was conveyed to the minds of the now respondents by the appellant's statement as to the two thousand sheep, the most material fact to be remembered is that, as both parties were aware, the appellant had not and, so far as appears, no other person had at any time carried on sheep-farming upon the unit of land in question. That land as a distinct holding had never constituted a sheep-farm. The two blocks comprised in it differed substantially in character. Hogan's block was described by one of the respondents' witnesses as " better land." "It might carry," he said, "one sheep or perhaps two or even three sheep to the acre." He estimated the carrying capacity of the land generally as little more than half a sheep to the acre. And Hogan's land had been allowed to deteriorate during several years before the respondents purchased. As was said by 8im J. :
In this view of the matter their Lordships concur.
Whether the appellant honestly and in fact held the opinion which he stated remained to be considered. This involved examination of the history and condition of the property. If a reasonable man with the appellant's knowledge could not have come to the conclusion he stated, the description of that conclusion as an opinion would not necessarily protect him against rescission for misrepresentation. But what was actually the capacity in competent hands of the land the respondents purchased had. never been, and never was, practically ascertained. The respondents, after two years' trial of sheep-farming, under difficulties caused in part by their inexperience, found themselves confronted by a fall in the values of sheep and wool which would have left them losers if they could have carried three thousand sheep. As is said in the judgment of Ostler J.: "Owing to sheep becoming practically valueless, they reduced their flock and went in for cropping and dairy-farming in order to make a living."
The opinions of experts and of their neighbours, on which the respondents relied, were met by the appellant with evidence of experts admitted to be equally competent and upright with those of his opponents, and his own practical experience upon part of the land, as to which his testimony was unhesitatingly accepted by the judge of first instance. It is of dominant importance that Sim J. negatived the respondents' charge of fraud.
After attending to the close and very careful examination of the evidence which was made by learned counsel for each of the parties, their Lordships entirely concur in the view which was expressed by the learned judge, who heard the case. The defendants failed to prove that the farm if properly managed was not capable of carrying two thousand sheep.
Questions of laches and of affirmance of the contract on the part of the respondents which were argued at the hearing, are not material for further consideration, and in view of the course of the proceedings and the finding of Sim J. as to the honesty of the appellant in the statements he in fact made, it would be improper to accede to the application which was made at the Board on behalf of the respondents for leave to proceed anew upon the charge of fraudulent misrepresentation.
Their Lordships will humbly advise His Majesty that the appeal should be allowed, and the judgment of Sim J. restored. The respondents must bear the appellant's costs here and below.
Note 1 L.R. 1892, 3 Ch. 1 at p.11. [Back]
Note 2 L.R.28 Ch. D. 7. [Back]
Note 3 L.R.9. App. Cas. 187, 20 Ch D 27 . [Back]