Smith v. Land and House Property Corporation

Facts

The vendor advertised a property for sale describing it as let to 'a most desirable tenant', Mr Frederick Fleck, for an unexpired term at a stated rent, as a first-class investment. In truth Fleck had been unable to pay rent during his two years of occupancy, had paid only under threat of legal proceedings, was in arrears at the time of sale, and was insolvent. The buyer, after agreeing to purchase, refused to complete and sought rescission and return of its deposit on the ground of misrepresentation.

Issues

• Whether the description of the tenant as 'most desirable' was a mere statement of opinion or a representation of fact.
• Whether the buyer was entitled to rescind the contract for misrepresentation.

Arguments

The vendor argued that calling the tenant 'most desirable' was only an expression of opinion, not a representation of fact, and so could not ground rescission. The buyer argued that, where the vendor alone knew the relevant facts, the statement implied that nothing was known to make the tenant unsatisfactory, which was untrue.

Held

The Court of Appeal held that the buyer was entitled to relief. Bowen L.J. explained that it is fallacious to assume a statement of opinion cannot involve a statement of fact: where the facts are not equally known to both sides, a statement of opinion by the party who knows the facts best impliedly asserts that he knows facts justifying that opinion. The vendor, who alone knew the tenant's payment history, by describing him as 'most desirable' asserted as a specific fact that nothing had occurred in the landlord-tenant relations to make the tenant unsatisfactory. As that implied factual assertion was false, the description was a misrepresentation entitling the buyer to rescind.

Ratio decidendi

Where one party has superior knowledge of the facts, a statement framed as an opinion carries an implied representation that the speaker knows facts justifying it, and is actionable as a misrepresentation of fact if untrue.

Significance

The leading authority distinguishing statements of opinion from statements of fact in misrepresentation, central to the operation of Section 18. It is the standard counterpoint to Bisset v. Wilkinson (where parties had equal means of knowledge) and was developed in Esso Petroleum v. Mardon (special knowledge or skill).

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