Scottish Court of Session Decisions

The Court of Session (Scotland) Act 1868 (31 and 32 Vict. cap. 100), section 29, and the Act of Sederunt, 20th March 1907, section 6, are quoted in the rubric.

David Oswald, Invercauld Arms Hotel, Spittal of Glenshee, brought an action against Alfred Fairs, hotel-keeper, Royal Hotel, Blairgowrie, for recovery of the purchase price of certain furniture in the latter hotel which the pursuer had agreed to sell and the defender to buy.

In his answers the defender averred as follows:—“(Ans. 1) … Explained that on 15th February 1909 the defender visited the said hotel, of which it was proposed that he should take a lease from the pro-prietrix, and examined the furniture which was then in the hotel. On that occasion the pursuer's wife, who showed the furniture to the defender in the absence of her husband, explained that when her husband had entered the hotel in 1904 the furniture had been valued at about £550, and that the whole furniture in said hotel was the same as that taken over by the pursuer in 1904, with the exception of the furniture in the commercial room, and one or two other articles which were her own private property and which she intended to remove. She further explained that a few articles had been renewed during the pursuer's tenancy of the hotel, but that these renewals together with the addition of the commercial room furniture would not affect the valuation made on pursuer's entry, as the whole furniture had depreciated since the said valuation was made. The defender was also shown a statement of the assets and liabilities of the Royal Hotel, as at November 1908, in which the value of the furniture, &c. (including omnibus £7), was entered at £561. Similar information regarding the value of the furniture was also given by Mrs Oswald to Mr R. R. Black, solicitor, Blairgowrie, the agent of the proprietrix, in order that he might communicate it to intending lessees, and Mr Black did communicate the said figures and information to the defender. The pursuer further confirmed this valuation by letter to Messrs Robertson & Black dated 23rd February 1909. Defender was informed that the whole furniture he would be required to take over at mutual valuation was the same as that which pursuer had taken over on his entry in 1904 (with the exception of a few articles specified in the correspondence between the parties, but with the addition of the commercial room furniture before-mentioned), and of the value as above stated. This is the furniture which the defender agreed to buy. (Ans. 2) … Explained that between the said 15th February and the valuation of the said furniture the pursuer caused a large quantity of the furniture which had been seen by the defender to be removed from the said hotel. The defender believes and avers that the pursuer used the said furniture to furnish another hotel which he had ac

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quired at the Spittal of Glenshee, and to furnish a house in John Street, Blairgowrie, rented by his wife from Mrs Meacher, Marlee House, Blairgowrie. In place of the furniture so removed pursuer substituted and added other and more valuable furniture which was not included in the said valuation in 1904, and which the defender had never seen and never intended to buy. The pursuer gave the defender no warning that he had done this. The defender entered into the said submission in the belief that the valuators were to value the said furniture which he had seen and bought. Had the defender been aware of the substitution and addition of the furniture before-mentioned he would not have entered into the said submission. The defender is and has always been willing to accept and pay for at a valuation the furniture which he bought, and to restore to the pursuer the said substituted and added furniture.”

The defender pleaded—“(2) The defender having entered into the said submission under essential error, induced by the fraud of the pursuer, the defender should be assoilzied.”

A proof was allowed and led.

The evidence is sufficiently disclosed in the Lord Ordinary's opinion, and the pursuer's letter of 23rd February 1909, referred to in answer 1, is there quoted.

After the proof was closed counsel for the defender presented an argument that the representations which he claimed to have proved that the pursuer's wife made when the furniture was viewed on the occasion referred to in answer 1, were false and fraudulent, and the Lord Ordinary without objection allowed him to amend his second plea to make it read—“(2) The defender having purchased said furniture, and having entered into the said submission under essential error induced by the fraud of the pursuer, the defender should be assoilzied.”

The facts are narrated in the opinion ( infra) of the Lord Ordinary ( Skerrington), who on 18th January 1910 assoilzied the defender.

Opinion.—“The pursuer Mr Oswald was tenant of the Royal Hotel, Blairgowrie, from Martinmas 1904 to 28th May 1909, when his lease ended, and the defender Mr Fairs entered as tenant. By letters dated 13th and 17th March 1909 the pursuer and the defender agreed that the defender should take over the ‘furniture in the hotel at a price to be fixed by two arbiters mutually chosen.’ … Thereafter, on 25th and 26th April 1909, the pursuer and the defender entered into an agreement and deed of submission by which they appointed two valuators as arbiters to fix the price of the furniture. In this deed the furniture is described as the furniture and articles in said hotel as per inventory annexed and subscribed as relative hereto.’ The so-called inventory is a short list under eight heads of the furniture, including silver plate, cutlery, crystal, electroplate, napery, and crockery. The valuation was made on 26th and 27th May, and on the latter day the arbiters signed an award fixing the value of the furniture, &c., at £943, 14s. 1d., being the sum sued for. In his pleadings as originally framed the defender pleaded that he was entitled to be assoilzied, in respect (1) that the pursuer fraudulently substituted for the furniture which he showed to the defender other furniture which the defender never intended to buy; and (2) that the defender entered into the said submission under essential error induced by the pursuer's fraud.

With reference to the defender's first plea-in-law, he avers that between 15th February 1909, when he visited the hotel and inspected the furniture, and the valuation, the pursuer removed a large quantity of furniture from the hotel and substituted and added other and more valuable furniture. After hearing the evidence, I am of opinion that the charge against the pursuer of having made fraudulent removals, substitutions, and additions has broken down, and that the defender's first piea-in-law ought to be repelled. I do not construe the pleadings as raising the question whether, without there being any iraud on the part of the pursuer, the inventory and valuation of May 1909 ought not to be rectified in respect that it omits certain articles purchased by the defender, and that it includes certain articles which he did not purchase. If that question had been properly raised I should have held that the inventory required some small corrections by way both of addition and of subtraction, and a remit to the valuators might have been necessary in order to fix the exact amount due by the defender after the inventory had been rectified by the Court. While I negative this charge of fraud, I do not wonder that the defender's suspicions were aroused as to the good faith of the pursuer and his wife, seeing that shortly before the valuation they were proved to have made certain removals, substitutions, and renewals of furniture, which, though not materially affecting the sum total of the valuation, were, in my opinion, not warranted by the terms of the contract between the pursuer and the defender. The conclusion that there had been fraudulent and wholesale removals, substitutions, and additions of furniture was an inference which the defender drew, and which his counsel asked the Court to draw, from the actings referred to, and also from a representation which the pursuer's wife is alleged to have made to the defender on 15th February 1909. If this representation was actually made, and if it was also true, it followed that wholesale additions to the furniture in the hotel must have been fraudulently made subsequent to 15th February 1909. The alleged representation (which Mrs Oswald of course denied having made) was to the effect that the furniture then in the hotel was the same as the pursuer had himself taken over from the former tenant in 1904 at a valuation of £554, with the exception of the furniture in the commercial room which the pursuer had brought with him to the hotel, and of any articles

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which had been worn out or broken during the pursuer's tenancy and had been replaced. It was clearly proved, and is indeed common ground, that the furniture, &c., included in the valuation of 1909, but excluding the new commercial room furniture, was substantially greater both in quantity and in value than the furniture, &c., included in the valuation of 1904.

If my judgment negativing wholesale substitutions and additions of furniture after 15th February 1909 is either acquiesced in by the parties or is adhered to on appeal, it follows that the alleged representation, if it was actually made by Mrs Oswald, was not in accordance with fact. The defender's pleadings are slovenly and obscure, but I do not think that they were intended to raise an alternative case to the effect that the defender was entitled to rescind the contract for the purchase of the furniture on the ground that it had been induced by false and fraudulent misrepresentation. The defender's second plea of essential error induced by fraud referred only to the submission, and was I think intended to meet the case of the alleged substitutions and additions having taken place between the date of the purchase in March and that of the submission at the end of April. Both the defender's pleas accordingly proceeded upon the assumption that the alleged representation was true in point of fact. The challenge of the submission was based not upon any fraudulent misrepresentation made on 15th February but upon an entirely different ground, which in my view of the evidence has failed. In short, the defender's position on the pleadings was the same as that which he had taken up from the time when he first saw the valuation, viz.—that the contract for the purchase of the furniture was valid and binding, but that owing to the pursuer's fraud the valuation was not in accordance with the contract. Though the defender on entering the hotel took possession of the furniture, and still remains in possession of it and uses it, I think that his solicitor sufficiently safeguarded his position by arranging with the pursuer's solicitor that the defender should consign £500 in their joint names ‘to await the adjustment of the inventory and valuation.’ This must mean the adjustment of the inventory in terms of the contract of purchase and sale which both parties regarded as valid and binding.

I have explained all this in some detail, because at the beginning of his speech on the evidence the defender's counsel for the first time challenged the validity of his client's contract for the purchase of the furniture. He propounded the dilemma that either there had been fraudulent and wholesale substitutions and additions, or that the representation which he claimed to have proved that Mrs Oswald made to the defender on 15th February was false and fraudulent. This alternative line of defence was foreshadowed in the examination and cross-examination of the witnesses, and neither at the proof nor at the hearing was any objection stated by the pursuer's counsel to the effect that it was not within the pleadings, or that he had been prejudiced by want of notice. When I pointed out to the defender's counsel in the course of his speech that his second plea would need to be amended so as to make it refer to the purchase as well as to the submission, the pursuer's counsel did not object to the amendment being allowed, or argue that it was not an amendment which was necessary in order that the real question in dispute between the parties might be determined. He pointed out, however, quite rightly, I think, that as the defence was based entirely on fraud, it could not with justice to his client be converted into one founded upon essential error induced by innocent misrepresentation. It must be kept in view that the defender led in the proof, and that the pursuer thus had notice of the case to be made against him. Though the procedure has been irregular, I am satisfied that no prejudice has been thereby caused to the pursuer, and I am of opinion that it is my duty to consider on its merits a question of vital importance which arises on the evidence, and which was carefully debated by counsel on both sides. Prior to the Act of Sederunt of 20th March 1907 the defender might possibly have made good his alternative defence by bringing an action to reduce the contract for the purchase of the furniture even after it had been decided in the Outer House that the valuation was not disconform to the contract; but I doubt whether that procedure would have been permissible in the present case.

I now proceed to consider the defender's claim to rescind the contracts which he made with the pursuer in March and April 1909, upon the ground that he entered into these contracts under essential error induced by a false and fraudulent representation made to him on 15th February by Mrs Oswald acting on the pursuer's behalf. [ His Lordship then dealt with a point which it is unnecessary to notice.]

As regards the question whether the representation complained of was in fact made to the defender by Mrs Oswald on the pursuer's behalf, the pursuer, who is very deaf, admitted that he left the negotiations to his wife. The defender and his agent Mr Sturrock both deponed that on their visit to the hotel on 15th February Mrs Oswald informed them that the furniture in the hotel which was offered for sale to the defender was exactly the same furniture as had been taken over by the pursuer from the former tenant in 1904 at a valuation of £554, with certain exceptions, viz., the furniture in the commercial room, some bedding which had been destroyed as unfit for use and replaced, and any articles which had been worn out or broken during the pursuer's tenancy and had been replaced. The defender and Mr Sturrock did not profess to reproduce Mrs Oswald's exact words, and the defender deponed that she also mentioned an eightday clock as an addition to the inventory of 1904—a piece of furniture not mentioned by Mr Sturrock. It is common ground

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on both sides that Mrs Oswald's private furniture was not to be taken over by the defender, and that it was not included in the 1904 inventory. The defender was made aware that Mrs Oswald valued it at £90. I have no doubt that both the defender and Mr Sturrock gave their evidence truthfully and to the best of their recollection. On the other side, Mrs Oswald deponed that on 15th February she had no conversation with the defender or Mr Sturrock with regard to the furniture, and she denied that she ever made any representation of the kind attributed to her. On the contrary, she and the pursuer deponed that on the occasion of an earlier visit to the hotel by the defender and Mr Sturrock on 23rd January they separately told the defender and Mr Sturrock that the hotel had not been fully furnished in 1904, and that large additions, which they specified, had been made to the furniture over and above what appeared in the inventory of 1904, and over and above the commercial room furniture. The defender and Mr Sturrock denied this. If the matter had depended on the evidence of these four persons, plainly the defender would have failed to prove his case. But he adduced a witness whose veracity, impartiality, and capacity as a man of business are beyond criticism, who deponed that during January and February 1909 Mrs Oswald gave him business instructions in which she made statements about the furniture substantially identical with those which the defender alleged that she made to him on 15th February, and essentially different from the statements which, according to her own and the pursuer's evidence, she and he made at or about the same time to the defender. This witness was Mr Black, a solicitor who was employed by the owner of the hotel to find a new tenant. He was not the pursuer's law agent, but was a person to whom Mrs Oswald would naturally give information about the furniture for communication to prospective tenants. As Mr Black's testimony related to the furniture in dispute in the present action, and as (according to his evidence) Mrs Oswald's information was intended to be handed on to prospective tenants, and was in part handed on to the defender, I consider it both competent and valuable. Though the evidence was not objected to, I should have disregarded it if it had related to a different though similar transaction ( Inglis v. National Bank of Scotland, Limited, 1909 SC 1038, 46 S.L.R. 730). Mr Black deponed that in the beginning of 1909 he was employed to find a tenant for the hotel, that he advertised it, and that Mrs Oswald approached him and asked him to stipulate that any incoming tenant should take over the furniture. He adds—‘I saw Mrs Oswald on several occasions in connection with that. I asked her what the value of the furniture was in her estimation, and she just said what was in this statement—£554. I said to her, if that was the valuation in 1904, would it not be considerably less now with depreciation, and she indicated that when she took over the furniture there were some mattresses and bedding that she had destroyed and that she had replaced, that she had in addition some extra furniture — the commercial room furniture; that there was an overmantel in one of the rooms, and I think a clock. Then she said that they had substituted a cabinet, I think in the drawing-room, but she would be quite pleased to replace the original, and consequently she thought the valuation of the furniture was about the same as it was when she went in. (Q) Did you understand that she authorised you to negotiate with the incoming tenant?—(A) Unquestionably; I was not acting as agent for her. (Q) But to try to induce them to take it over at this figure of £550?—(A) Yes. She telephoned me several times to go along, and that was always her explanation.’ It is a proved fact that at a meeting in Mr Black's office, held on 15th February, he read over to the defender and Mr Sturrock a statement in Mrs Oswald's handwriting, prepared so recently as November 1908, to the effect that the value of the furniture, including linen, plate, glass, crystal, &c., was £554. He further told them that Mrs Oswald had authorised him to say to any inquirer that the value would not exceed £554. The holograph statement referred to was made up by Mrs Oswald in November 1908, with a view to a proposal that the owner of the hotel should either buy the furniture or lend money upon it. The figure in this statement was of course copied from the valuation of 1904. Mr Black deponed that Mrs Oswald told him in November that the furniture in the hotel was exactly what the pursuer had taken over in 1904 with the exceptions already referred to.

Immediately after leaving Mr Black's office on the morning of 15th February the defender and Mr Sturrock inspected the furniture in the hotel, and then (according to their evidence) Mr Sturrock, in the defender's presence, had a conversation with Mrs Oswald, in which he stated that the furniture did not appear to them to be worth £550, and that, taking depreciation into account, it could not be worth that sum. In reply (as they say) Mrs Oswald made the representation complained of. Mrs Oswald meets this evidence with a denial. She further denies that she ever expressed by word of mouth any opinion whatsoever as to the value of the furniture which was in the hotel in 1909 either to Mr Black or to the defender or to Mr Sturrock. She explains that the statement in November 1908 was intended to be and was understood by Mr Black as a mere repetition of the amount of the 1904 valuation, and that it was not intended as an estimate of the value of the furniture, &c., as at November 1908. In this conflict of parole testimony the pursuer's counsel founded strongly upon a letter which was written by Mrs Oswald to Mr Black on 23rd February 1909, and of which the latter sent a copy to Mr Sturrock. In this letter Mrs Oswald wrote—‘In reply to yours of yesterday we wish to say that we shall expect

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Mr Fairs to take over at mutual valuation the same amount of furniture as we did on entering here, nothing more, the said amount being £554. Of course you understand that after the private articles which belong to me are removed there will still be more than that amount, and we should like if Mr Fairs could come and have a look over, and if any particular articles should be desired to be removed, we could then perhaps arrange to the satisfaction of both parties.’ The position taken up by Mrs Oswald as stated in this letter is consistent with what she deponed to have been her position all along both towards the defender and Mr Sturrock and also towards Mr Black, and it is inconsistent with the attitude attributed to her by these gentlemen. It was therefore legitimately founded upon as important real evidence showing that, first Mr Black, and next the defender and Mr Sturrock, must have made a mistake when they understood Mrs Oswald to say that she estimated the value of the furniture, &c., in the hotel at £554, and that they must have been equally mistaken as to the reason which, as they say, Mrs Oswald gave for holding that opinion, viz., that the commercial room furniture was the only important addition to the inventory of 1904. There is, however, another view which may be taken of this letter, viz., that for some reason Mrs Oswald desired to correct any impression which she might have conveyed to the effect that the whole furniture, &c., might be bought for £554, but that she failed (either intentionally or unintentionally) to correct the statement which she is alleged to have made on 15th February as to what articles had been brought into the hotel since the inventory of 1904. If the defender had seen this letter at the time (which he did not), he would have learned that Mrs Oswald's opinion as to the value of the furniture was different from what he had understood her to express on 15th February, but he would not necessarily have learned that the quantity of furniture in the hotel was greater than he supposed it to be.

Only two other letters need be referred to. On 18th March 1909 Mr Sturrock wrote to the pursuer's agents asking for a copy of the valuation of 1904 ‘with a view of seeing what is actually in the hotel.’ On 22nd March the agents replied, sending a copy of the inventory, and adding—‘In addition to the articles enumerated in it Mr Oswald mentions that he also took over at valuation the flagpole and front door lamp, which Mr Fairs will also take over. Further, some of the furniture detailed in the inventory was removed by Mr Oswald, who substituted his own furniture of better quality.’ The flagpole and lamp were duly included in the inventory annexed to the submission. The last sentence of this letter referred, I think, to the commercial room, which the pursuer had furnished with superior furniture of his own, while the furniture formerly in that room had, as the pursuer deponed, been ‘removed’ to room No. 1. Mr Young, the writer of the letter, deponed that this letter reproduced the pursuer's exact words. The pursuer was not asked why he did not instruct his solicitor to point out to Mr Sturrock that the additions since 1904 were so important that any reference to the valuation of that year was misleading. I assume in his favour that the information which he actually communicated through his solicitors was not intended to mislead. But the incident bears out the view that, rightly or wrongly, Mr Sturrock regarded the inventory of 1904 as showing the furniture actually in the hotel in 1909, subject, of course, to certain specified additions and alterations.

Upon the issue whether or not the alleged representation was made to the defender by Mrs Oswald on 15th February, my verdict is in favour of the defender, who, in my opinion, has in this matter discharged the heavy burden of proof incumbent on him, and has established his case. I cannot bring myself to believe that in a matter so simple Mr Black repeatedly misunderstood Mrs Oswald's instructions, nor can I accept the conclusion that by some coincidence the defender and Mr Sturrock have honestly but mistakenly come to believe that Mrs Oswald made to them on 15th February representations substantially identical with those which Mr Black also imagined that she had made to him on several previous occasions.

The next question is, whether the representation if made was false in fact. As to this I have already said there can be no doubt. Further, as it cannot be suggested that Mrs Oswald believed the representations to be true, it cannot be excused as an innocent misstatement. Lastly, did the misrepresentation induce essential error? To a man of limited means it would be material to have some guide as to what he might be called upon to pay on a valuation of furniture and furnishings, the exact quantity of which it was impossible to ascertain by mere inspection without an inventory. No better guide could have been provided than the representation, if only it had been true. It made all the difference between a prudent and an imprudent contract. The error under which the defender laboured did not relate to the subject-matter of the purchase, which was the whole furniture, &c., of the hotel per aversionem (with certain exceptions). It related to the quality and quantity of the furniture included in the purchase, a matter which was in my opinion tacitly essential to the bargain. Accordingly the case falls within Mr Bell's definition—Prin., sec. 11. It also falls within the description given by Lord Watson in Menzies v. Menzies (1893), 20 R. (H.L.) 108, p. 142, 30 S.L.R. 530, seeing that the defender deponed that he would not have bought the furniture if he had not known the actual facts.

Accordingly I sustain the defender's second plea-in-law as amended, but reserve consideration of the question whether as a condition of obtaining absolvitor he must give back to the purchaser the share in the coaching adventure. If neither party

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desires to be heard on this point I shall find that before decree of absolvitor is pronounced the defender must tender to the pursuer an assignation of said share and payment of any profits received by him, in return for repayment by the pursuer to the defender of the sum of £60, with interest thereon at 5 per cent. since 26th May 1909.”

The pursuer reclaimed, and argued—The Act of Sederunt of 20th March 1907 had been invoked too late to admit by way of exception what would have required an action of reduction. The record was not the basis of the Lord Ordinary's judgment, and the Act of Sederunt had been wrongly applied. The alleged misrepresentation could not be founded upon to rescind the contract, and it was not proved.

Argued for the defender—The defender had no means of knowing prior to the proof the precise nature of the fraud by which he had suffered. It was then ascertained that fraudulent misrepresentation had induced the contract. Where fraud appeared from the evidence of the party suing, the Court would decide the case on the evidence independently of the record — Bile Beans Manufacturing Company v. Davidson, July 20, 1906, 8 F. 1181, 43 S.L.R. 827. The evidence of the pursuers in the present case on the subject of representations had to be considered along with the evidence of the witness Black, which affected the pursuer's credibility.

At advising—