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DERRY v. PEEK IN THE HOUSE OF LORDS.

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THE
THE judgments delivered in the Court of Appeal in the case of

Peek v. Derry 1 appear to have been regarded by the Editor of the Law QUARTERLY, not without satisfaction, as enlarging and promoting the further enlargement of the bounds of actionable misrepresentation. The reversal of the decision of the Court of Appeal by the House of Lords ? seems, on the other hand, to be regarded, not as restoring the status quo as to actionable misrepresentation, but as striking at the roots of commercial morality and of our conception of fraud.

I cannot think it desirable that an appeal should be addressed to all courts in which the common law is administered , to disregard a decision of the House of Lords if they can, to elude it if they cannot. And I feel this the more strongly because the judgment in Derry v. Peek seems to me to have checked the growth of a very undesirable confusion between negligence and fraud, and to have stated the law as it existed before the decision of the Court of Appeal in the clearest and most intelligible form.

The cases have been sifted again and again: I should be glad to state the conclusion which I deduce without a recapitulation of the decisions.

Innocent misrepresentation made by one contracting party to another, if of a material fact inducing the contract, is a ground for getting the contract set aside, and presumably also a ground for successful defence to an action brought. The defendant in Bannerman v. White 4 might nowadays have set up misrepresentation as a defence, and would not have been compelled to drag the misrepresentation by a tour de force into the terms of the contract. The person induced to contract by such a misrepresentation may obtain an indemnity, but he cannot obtain damages (Nevbigging v. Adam5). To found an action for damages upon a representation the plaintiff must show, not only that it was false, that it was addressed to him with the intention that he should act upon it, and that he did so; he must show that it was not innocent, in other words that it was not only false but fraudulent.

Now it is clear that a representation, if known to the maker to be false, is not rendered innocent by the absence of guilty motive. 37 Ch. Div. 541.

14 App. Ca. 337. [I may be allowed to explain that I was thinking chiefly of American Courts, who

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of course, openly disregarl English decisions if satisfied that they are wrong. In fact the decision of the Court of Appeal has already been approvedl in Massachusetts, Chatham Furn:nce Co. v. Jofrutt, 147 Mass. 403. --- En.] 110 ('. B. X. S. 844.

3.4 Ch. Div. 5$ 2.

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If A tells X what he knows to be false, intending X to act upon it, and X does so to his hurt, A cannot defend himself successfully on the ground that he spoke for X's good (Polhill v. Walter1, Peek v. Gurney?).

Again, the law was clear, until it was somewhat obscured by the language of the Court of Appeal in Peek v. Derry 3, that a misrepresentation made recklessly, that is with no knowledge, is not rendered innocent by the fact that the maker did not know it to be certainly false (Reese Silver Mining Co. v. Smith 4).

It is here that Peek v. Derry introduced an extension of liability. It was not enough for the Court of Appeal that a man should be liable for representing himself to possess a belief which he did not possess; the Court extended the liability from the dishonest representation of a non-existent belief, to the honest representation of a belief not based on reasonable grounds.

The defendants stated in their prospectus that their Act gave them a right to propel tramcars with steam power. As a matter of fact, their Act gave them this power subject to the consent of the Board of Trade 5, and this consent was refused. But the plans for their tramway had been submitted to the Board of Trade before their Act was passed, and the subsequent consent of the Board had appeared to the defendants a mere formality and matter of course.

At any rate, the Court of Appeal and the House of Lords agreed in holding that the defendants made their representation in an

honest belief ' of its truth. The Court of Appeal held that there was no reasonable ground for this belief: the House of Lords held that, if the belief was honestly entertained, an action of deceit would not lie, though the grounds of belief were insufficient.

For myself, I should humbly dissent from both Courts on the question of fact. It appears to me that the directors stated that as true which they knew not to be true, though they believed it would certainly and very shortly be true. But though I might with

. infinite hesitation differ as to the existence of an honest belief, I heartily rejoice in the decision of the House of Lords that the case was fraud or nothing, that, given an honest belief, the reasonableness of it does not affect the liabilities of the parties.

Nothing is said in the judgments delivered to affect the principle that absence of reasonable ground for belief is evidence that the belief was not honestly entertained. But the distinction between fraud and negligence is not lost sight of. Want of reasonable care in statement is not a cause of action in itself, though such want of

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3 B. & Ad. 114

L. R. 6 H. L. 377. 37 Ch. Div. 541.

· L. R. 4 H. L. 64. 5 [And of the local corporations, one of which also refused.-En.]

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care may be a ground for concluding that the maker of the statement deliberately refrained from knowing inconvenient facts.

It has been suggested that the decision overrules Polhill v.Walter1. A moment's reflection shows that it does nothing of the sort. No one ever suggested that Walter honestly believed that he possessed the authority which he represented himself to have. honest in so far as he did not contemplate any personal gain, and thought he was acting for the convenience of all parties, but he stated what he knew to be false.

The defendants in Peek v. Derry have been found by three tribunals to have had an honest belief' in their misrepresentation, and though we may think that they had not this honest belief, the decisions are all based on the supposition that they had.

The only change made by the decision of the House of Lords is to be found in the recurrence to the rule of Common Law, that no liability for deceit can arise from a statement made in the honest belief that it is true. To admit enquiry into the reasonableness of a belief admitted to be honestly entertained might be gratifying to legal practitioners to whom would be opened a vista of profitable litigation, or to the jurist who likes to contemplate rules of law through a golden haze of equitable possibilities. It could not be satisfactory to any one who is ever likely to be asked to give an opinion to his neighbour on a matter of business, nor indeed to those who believe the Common Law, as it stands, to be a monument of practical common sense.

WILLIAM R. ANSON.

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THE SUPERIORITY OF WRITTEN EVIDENCE.

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HETHER or not the evidence offered in any particular case is

sufficient for proof, is generally in modern law a question for the discretion of those with whom the decision rests. It is a matter to be determined not by rule of law but by natural reason and sound judgment. In early law, on the other hand, there is a well-marked tendency to set up an external or objective measure of evidence and test of proof; to make the relation between evidence and proof a matter not of sound discretion but of strict law. For example, we are told that, amongst the Saxons, cases of conflicting testimony were settled by fixed rules as to the relative value of the oaths of different classes of persons. So also if an accused person could procure in his favour the oaths of a fixed number of compurgators he was entitled to acquittal; such evidence constituted proof by rule of law, and whether it satisfied the court or not was a consideration completely irrelevant. Trial by jury itself is another example ; for the verdict was taken not as mere evidence for the discretion of the court but as conclusive proof; whereby jurymen naturally ceased to be mere witnesses and became judges of fact. The most notable instance however of this tendency to make the relation between evidence and proof a matter of law is the great division of evidence into the three classes of matter of record, matter of writing, and matter of avermentThe two former classes were said to be higher' in their nature than the third, and for some purposes matter of record was higher than matter of writing. This rule as to the relative highness of these species of evidence has had numerous and important effects upon our law, and it may be a task not without interest to trace such a principle through the tangled jungle of our legal history. Leaving matter of record for later consideration, we shall now make an examination of the meaning and consequences of the principle that matter of writing is higher than matter of averment.

That a deed was originally merely a species of evidence is a fact obvious enough, though we have come to look on a sealed instrument rather as a forinality incident to certain contracts and other acts in law than as evidence thereof. The common form, 'Now

1 See Fleta II. 63. $ 9 ad fin., for some detailed rules as to proof that supply further illustrations.

2 Averment'is usel elliptically for averment by the country, or in some other mamer than ly record or leed.

, this indenture witnesseth,' may serve to remind us of the true nature of such an instrument. A deed was originally regarded as a written admission of certain facts by the makers of it, and admissible as such in evidence against him. Such evidence was recognised as being better or stronger than the evidence ordinarily available, to wit, good suit or a jury. And in accordance with the tendency already mentioned, this superiority did not remain merely a matter of fact for the guidance of judicial discretion, but became a rule of law, the rule namely that matter in writing is higher than matter of averment. It is to this rule, as we shall see, that most of the peculiar characteristics of deeds owe their existence.

Of the rule in question there are two leading applications: first, that where matter in writing and matter of averment are opposed to each other the former must prevail ; secondly, that where matter in writing is available matter of averment is inadmissible instead thereof. In other words, inferior matter is admissible neither in opposition to nor in substitution for superior. Each of these rules will be separately discussed, but before doing so there diare two remarks of general application to be made.

In the first place, it is to be noted that when these rules were established a writing meant a writing under seal. When therefore sealing ceased to be the usual method of authenticating a document, it became a question whether the ancient rules were to be extended to all writings or restricted to deeds. As we shall see, this question has been answered differently in different cases, the guiding principle being that if a rule was beneficial it was to be extended to all documents, while technical and antiquated rules were to be restricted to deeds. The accident of the substitution of signature for sealing as a method of authenticating documents gave in fact to English law an opportunity for one of those new departures that have proved so

a method of legal progress.

In the second place, it is to be remarked that although the general principle of the superiority of matter in writing is a rule of evidence, particular applications of it have passed over into the domain of substantive law, and have in many cases become so disguised that their origin is no longer recognised. The extent to which the law of procedure has moulded and modified the substantive law is a noticeable point in the history of our legal system. The remedy has often determined the right rather than the right the remedy.

The first general application of the principle that matter in

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