• In the case of Smith v Land & House Property Corporation [1884] 28 Ch. D. 7, the court made a landmark ruling on the idea of an innocent misrepresentation and how it is valid grounds for rescission.
  • This property law case is about leases and misrepresentation.

Facts of the Case

  • C was seeking buyers for their hotel. C exaggerated the condition of a tenant (called them the “most desirable”) even though they were struggling financially to potential purchasers.
  • The tenant went into liquidation having been in arrears prior to this. D did not complete the contract so C sued on the grounds of specific performance.
  • D counter claimed that C made a misrepresentation and that induced them into contracting.

Issues

  • The main question is whether there was a mere statement of opinion regarding the hotel rent.
  • Whether the purchasers acted upon the reliance of the representation.

Held by Court of Appeal

  • Appeal dismissed – statement made constitutes as misrepresentation not just a mere opinion expressed because D knew all the facts.

Bowen LJ

Question of fact

  • The phrase “most desirable” is an implied statement of fact not an opinion. The vendors had knowledge the tenant was behind on rent.
  • “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.”

Misrepresentation

  • C as a landlord knew of the tenant’s capabilities and current conditions hence why D viewed the representations as factual.
  • After citing Redgrave v Hurd [1881] 20 Ch D 1, the judge held having knowledge of the information does not allow the person who made the misrepresentation to avoid the liability from making a misstatement.

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