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ARMITAGE et al. v. BROWN.
D. C., Colombo, 3,819.
Innocent misrepresentation—Principal and agent—Absence Of authority to actfor principal—Liability of agent for damages.
If A is induced to contract with B on the footing of an innocent mis-representation, he would have a restitutive remedy against B, restoringto him what he had actually lost in consequence of entering into suchcontract.
If A is under a legal duty to tell the truth to B, he would be liablefor the consequence of an innocent misrepresentation made by himunder the belief of which B acted.
Where A, without being armed with formal authority, professedto act as agent of B, and bade for at a public auction, and agreed tobuy a house as such agent, and B repudiated the sale, and C, the vendor,sued A for damages,—
Held, per Withers, J., and Browne, A.J. (dissentiente Lawrie,A.C.J.), that, in the absence of fraudulent intent or recklessness, A wasnot personally liable in damages ; and that he had not entered into avalid contract with C, nor was he under a legal duty to him to statethe truth.
TDLAINTIFFS claimed Re. 2,850 as damages from the de-fendant on the basis of the following allegations : that theycaused to be pat np for sale by public auction a house in the Fortof Colombo ; that defendant, pretending to have full authority toact for the Bank of Madras, and upon his warranty that he wasauthorized by the said bank to be such agent, and to bid for andpurchase the said house, and do such other acts as may benecessary therefor, induced the plaintiffs to accept his bids andto conclude the sale with him ; that defendant, professing to actas such agent, induced the plaintiffs to accept his signature for andon behalf of the said bank to the notarially attested conditions ofsale, and to enter into the contract therein embodied ; that theplaintiffs, having entered into the said contract with the defendant,were always ready and willing to fulfil their part of the obligationunder the said conditions; that the said bank has repudiated thesaid conditions and contract; and that defendant was not in factauthorized to bid at the sale or to subscribe its name to theconditions.
The defendant pleaded that the plaint was bad in that, inter,alia, it did not allege that defendant made false representationsknowing them to be false, or that he knew that he had no authorityto act for the bank. He denied the several allegations of factmade in the plaint, and stated that the bank, having discoveredafter the day of the Bale by auction that the description of theproperty contained in the conditions was erroneous, justly refusedVOL. I.t L
Jan. 31 andFeb. 8.
Jan. 31 andFeb. 8.
With kbb, J.
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to purchase it; that he was authorized to buy the whole of thesaid house, as the conditions purported to sell, but that whatwas attempted to be sold was only four-fifths thereof.
At the trial it appeared that, upon the conclusion of the sale byauction, the following memorandum attested by a uotary publicwas signed by the defendant and the auctioneers :—
At the sale by auction made this day of the property described in theannexed particulars (viz., the conditions of sale), the Bank of Madras, byR. L. M. Brown, was the highest bidder for, and was declared the purchaserof, the said property at the price of Rs. 25,050.
As witness our hand at Colombo this 16th day of November, 1891.
For the Bank of Madras, R. Lewis M. Brown.
Forbes & Walker, Auctioneers.
The defendant admitted that he had no notarial deed from thebank authorizing him to bid for the premises.
On the 17th November the auctioneers called upon the Bank ofMadras to pay them Rs. 6,563 99 in terms of the conditions of saleon account of the price, but the bank replied that it “ did not“ purchase any property at public auction on the 16th November,“ and therefore cannot send you a cheque as requested.”
Thereupon, in pursuance of the conditions of Bale, the house wasput up for sale again, after notice to the bank, and sold to a thirdparty for Rs. 22,200.
The damages claimed by the plaintiffs represented the differencebetween the original price, Rs. 25,050, and the price recovered atthe second sale, Rs. 22,200.
The Additional District Judge (Mr. Conolly) dismissed plaintiffs’case on the ground that they had not discharged the onus ofproving that defendant had no authority from the bank to bid forand buy the premises.
DomJiorst, for appellants.
Dumbleton, for respondent.
8th February, 1895. Withbbs, J.—
This is an action to recover damages from the defendant on theground that he induced the plaintiffs to contract for the sale ofcertain premises in Colombo with a local bank by a representationthat he was the agent of the bank to conclude the said contract,when in fact he was not so.
I understand the defendant’s answer to be that it is true that hewas not authorized by the bank to purchase the premises referredto, but that he signed the contract in the belief as to a particularstate of facts into whioh the plaintiffs had misled him.
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I assume, for the purpose of my judgment, that the plaintiffs 1896.have made out a primd facie case of innocent misrepresentation February s.of authority, by which they were induced to sign a contract of Withxbs, J.purchase and sale, which the defendant’s principal, for somereason or another, refused to ratify.
Two facts with regard to this action are important to notice.
In the first place, the action itself is one for damages. In thesecond place, the plaint does not pretend to suggest that thedefendant’s misrepresentation was made either with fraudulentintention or recklessly, and without care whether it was true ornot. It merely says that he had not the authority which by hisconduct he professed to have.
In these circumstances, is the defendant personally liable to theplaintiffs in damages ?
Mr. Dornhorst argues that he is, and he cites the case whichseems to me to be exactly in point, in support of his argument,namely, Smout v. Ilbery, reported in 10 M. and W., p. 1.
Baron Alderson, delivering the judgmentof theCourtof Exchequer,observed as follows “ There is a third class in which the“ Courts have held that, where a party making the contract as agent“ bond fide believes that such authority is vested in him, but has in“ fact no such authority, he is still personally liable. In these cases“ it is true the agent is not actuated by any fraudulent motives ;
“ nor has he made any statement which he knows to be untrue.
“ But still his liability depends on the same principles as before.
“ It is a wrong, different only in degree, but not in its essence, from“ the former case, to state as true what the individual making such“ statement does not know to be true, even though he does not“ know it to be false, but believes, without sufficient grounds, that“ the statement will ultimately turn out to be correct. And if that“ wrong produces injury to a third person, who is wholly ignorant“ of the grounds on which such belief of the supposed agent is“ founded, and who has relied on the correctness of hiB assertion,
“ it is equally just that he who makes such assertion should be“ personally liable for its consequences.”
I venture to think that that statement of the law is no longeraccurate in view of the opinions of the House of Lords in thewell-known case of Derry v. Peek. In Bishop v. Balkis Consold.
Company (59 L. J., Q. B. 565), where the plaintiff had lost theprice of the shares which he sought to recover from the company,by reason of a merely careless misrepresentation, it was held thatno action would lie. Lord Justice Lindley delivered the judg-ment of the Conrt of Appeal in that case, and he made thisobservation: — “ The plaintiff was induced, however, by the
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1895.“ ‘ certification ’ to part with his money, and he has lost it; and if
Ibbrutry 8. « an action would lie for a careless misrepresentation, I should beBrowns, A.3. “ of opinion that the plaintiff could recover the money thus lost“ from defendant, but no action lies for such a misrepresentation ;“ this was finally decided in Derry v. Peek, which it is not for“ me to criticise.”
In Laiv v. Bouverie, which was an action by an intendingencumbrance against the trustee of a fund for loss sustained byhis negligent misrepresentation with regard to certain encum-brances, the same Lord Justice in his judgment observed “ that“ until the case of Derry v. Peek was decided, it was generally“ supposed to be settled in equity that liability was incurred by a“ person who carelessly, although honestly, made a false represen-“ tation to another about to deal in a matter of business upon the“ fact of such representation. This general proposition is, however,“ quite inconsistent with Derry v. Peek.”
There are, I dare say, exceptions to this doctrine. I take it thatif A is induced to contract with B on the face of an innocentmisrepresentation, he would have some restitutive remedy againstB, which would restore him what he had actually lost inconsequence of entering into a contractual relation with B. So, Itake it a person who is under a legal duty to tell the truth toanother would have to answer for the consequence of an innocentmisrepresentation under the belief of which that other acted.This deft idant, however, entered into no contract with theplaintiffs, and was under no legal duty to them when he signedthe conditions of sale as the agent of a local bank.
The conclusion I come to is that the plaint discloses no causeof action for damages against the defendant. If I am wrong inthis view of the law, I certainly think defendant ought to have anopportunity given him to make good his defence.
Mr. Dumbleton urged that the representation complained ofrelated to a matter of law, and was on that ground not actionable.That may be so where the representation relates to a pure matterof law, but that cannot be said, in my opinion, of the defendant’srepresentation. For these reasons I would affirm the judgmentof the Court below with costs.
I venture to concur entirely in the views expressed by mybrother Withers. In effect the case of the defendant, in the viewtaken of his position by the rest of the Court, appears to be thatcontemplated as possible by Lord Herschell in Derry v. Peek : thatof a man who may be blameworthy, as from having formed his
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belief carelessly or been unreasonably credulous—a position in 1896.■which he would be in nowise liable for an action of deceit—and Mb'*a*y *•that, as my brother has pointed out, it might be open to the plaintiffs Bbowhb, A.J.to obtain on some ground such relief -as was necessary to themagainst the consequences of his act, but that (albeit this is not anaction of deceit) it is not open to them to obtain the remedy ofdamages for which they here prayed.
At the same time, and with deference to the opinions expressedby the rest of the Court as to the position actually occupied or inhis pleading assumed by the defendant, I would say I am notinclined to dissent from the views held by the learned DistrictJudge, but would rather affirm bis judgment from his own point^ of view. Granting that the signature of the agent amounted toan affirmative, that he had_ authority to do the particular act, havethe plaintiffs discharged the onus on them and disproved that hehad such authority ? They submit as their proofs (1) repudiationby the bank, his principals ; (2) his own statement in his answer ;and (3) the fact that he held no power of attorney under whichhe could alone act as agent of a corporation, a ground which wasnot at all suggested in the plaint. I concur in the holding thatthe repudiation in the letter by the proctors for the bank, whomerely wrote that “ the bank did not purchase any property at“ public auction on the 16th instant,” is not conclusive proof thatdefendant had no authority to make the one bid there, the onlybid made on their behalf. Behind, and as ground for, such a denial,there may have been intended in any possible action a defence ofsuch want of consensus ad idem as was argued before us, ormisrepresentation as pleaded, or other matter apart altogetherfrom a denial that defendant acted without their authority inwhat he did do and sign in their name. As to the second proof,we know nothing of the facts of any authorization, howeverimperfect. The plaintiffs abstained from an investigation thereofby examination of the defendant’s principals or their manager inColombo. I conceive it to be possible that the corporation, bytheir authorized manager, seeing an advertisement of intendedsale of “ all that house No. 5, Baillie street, occupied by S,” eithersatisfied themselves by inspection of deeds, &c., as to the subject-matter of sale, or else were content from the names of the vendorsand brokers subscribed to the advertisement to believe whatwould be sold, and so simply sent the defendant to be their mouth-piece in bidding at the sale of this single lot without casting onhim any duty of inspection of deeds or verification of parcels, andthat they were prepared to acknowledge and ratify all his acts forthem until, as he has pleaded, they (and not he), subsequent to the
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1896. Bale, discovered material error of description. In any actionFebruary 8. agajnat them, I would be quite prepared to find them acknowledgeBaowxx, A.J. ingthe agency and defending themselves upon that misdescriptionalone. The defendant’s plea, which has been read in evidenceagainst himself, is not happily framed, and in the want ofaverment of the plaintiffs’ responsibility for the advertisementmight even fail as ground of defence. But in it he has assertedhe had the authority of his principals to bid for the houseadvertized, and that he bond fide did so ; and if his pleader hasgone beyond those assertions and, taking into consideration quiteunnecessarily the subsequent discovery and its relation back tohis own acts at the sale, has indicated what would be the defenceof his principals in any contest between the vendors and them, Iwould not wrest the statements made for such purpose into anadmission of neglect in or carelessness of inquiry by defendanthimself, which I consider, would be necessary to constitute anadmission that he had done an act which he was not authorizedto do. I would regard this defence as one that under the mistakeaverred the authority was given, accepted, and acted upon, andthat it continued of force until the mistake was discovered, and sothat the defendant always had authority. And in the absence ofacknowledgment or proof of special duty of inquiring, &c.,imposed on him, I would also regard this defence as possiblysustained.
As to the third proof, that defendant had no power of attorneyunder the seal of the corporation, it may be, as Mr. Dumbletonhas contended, that this was the sole proof on which plaintiffs atthe trial relied. The record does not read so to me, seeing that itwas advanced at the trial only after the learned District Judgehad, at least, doubted the sufficiency of the other proofs. But ifit were so, I am not at all clear how far the plaintiffs would beentitled to rely thereon when they offer as proof only thatdefendant Bigned the conditions of sale, and not that their notaryor they then inquired as to whether defendant was so authorized,or that defendant made any representation thereof. It has notbeen proved by the plaintiffs what powers this corporation underany charter from which it may derive its existence may or maynot have, as to the appointment of an agent to bid at a land saleor conduct preliminary negotiations for any transaction such asthis outside the lines of its banking business proper. The mattermay be open to discussion (Story on Agency, section 52).
In this view, that the plaintiffs have not established that in allhe did the defendant had not the authority of his principals, theconclusion expressed by my brother is the more acceptable to me.
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The plaintiffs aver that the defendant, Mr. Brown, assumed tobe the agent of the Bank of Madras ; that he pretended to havefall authority to act for the bank ; that he did by his acts assertand warrant to the plaintiffs that he was authorized by the bankto be each agent to bid, &c.; bat that the defendant was notauthorized by the bank to bid at the sale, nor to subscribe itsname to the conditions of sale, &c.
There is in the plaint no averment of fraud or deceit. Theaction seems to me to be one founded on the doctrine “ that a“ person professing to contract as agent for another, impliedly,“ if not expressly, warrants or promises to the person who enters“ into such contract upon the faith of such profession, that the“ authority which he professes to -have does in fact exist.” Iventure to doubt whether the law applicable to such a case hasbeen affected by the judgment of the House of Lords in Derryv. Peek, and by the later cases Bishop v. Balkis Consol. Companyand Law v. Bouverie.
In the leading case, Derry v. Peek, the plaintiff laid his actionon deceit; he averred fraud. Here, the cause of action is notfraud, but the breach of a warranty ; and in my humble opinion,the plaintiffs need not aver nor prove deceit or fraud, and thedefendant is liable in the damages caused by his representationthat he was agent, if that representation was not correct.
As I read the answer, the defendant admits that he had noauthority from the bank to bid for the house described in theconditions of sale; he had no authority from the bank to subscribeits name on these conditions of sale.
The plaintiffs thus, in my opinion, made a good primd faciecase for damages against the defendant. I cannot say that I amsatisfied that the plaintiffs, either in the plaint or at the trial,showed that they had sustained damage beyond the expenses ofthe day of sale, expenses which were useless and which had tobe incurred anew in consequence of the sale to the plaintifffalling through. –
While the plaintiffs made out a primd fade case against thedefendant, there are in the answer averments which, if proved,would exonerate the defendant. He avers, as I understand, thathe acted as the agent of the bank in this matter, induced by amistake in fact caused, partly, if not wholly, by the acts of theplaintiffs themselves ; that he had read in the local newspapers adescription of the extent of the premises which the plaintiff saidthey were about to sell; that that advertisement did not describethe premises correctly : the house which the plaintiffs owned and
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which they described in the conditions of sale was a smaller an8^less valuable house than the advertisement had described. Thebank had authorized the defendant to buy the larger house, ithad not authorized him to buy the smaller house, and his mistakein bidding for the latter was caused by the advertisement forwhich the plaintiffs were responsible.
The rest of the Court are against this view. I can only say thatas the trial in the District Court was hasty and Incomplete, and asthe judge who presided is no longer in the Colony, I would haveliked to have set aside this decree and to have sent the action tothe District Court for new trial on issues to be carefully framed,and I would have left the costs to depend on the final result.
ARMITAGE et al. v. BROWN