Plaintiff about to buy freehold of public house – Defendant interested in taking six-year lease – Plaintiff relaying to defendant turnover and profit information imparted to plaintiff by vendors – Defendant proceeding to take lease – Information subsequently shown to be false – Whether defendant entitled to rescind for misrepresentation
In April 1994 the plaintiff (a member of the Grosvenor Inns group) became interested in purchasing, with a view to letting, the Chequers Inn in Harlow, Essex, after being informed by the vendors that the turnover had been built up to approximately £300,000 in 3.5 years thanks to a good food revenue and an annual “wet” business of around 450 barrels. After examining the accounts and arranging for secret visits during opening hours, the plaintiff entered into a “subject to contract” agreement to buy the pub for £305,000 and thereafter verified the barrelage with the vendors’ various suppliers. Before committing itself to the purchase, the plaintiff interviewed the defendant, who was one of several prospective licensees located by the plaintiff’s agent who had published an advertisement and furnished particulars referring to takings of £7,000 per week. At the interview, one of the plaintiff’s directors, B, relayed to the defendant the information given to him by the vendors and made it clear that the plaintiff was intending to purchase the freehold on the basis that the information was accurate. B also repeated the vendors’ comment that there was further turnover “off the books”. The defendant made his own inquiries and on August 12 1994 entered into an agreement to take a six-year lease containing, inter alia, a forfeiture clause and a covenant tying the lessee to certain beer suppliers. On August 15 1994 the plaintiff bought the freehold. Over the next 12 months the defendant obtained various concessions from the plaintiff on the ground that turnover was below his expectations. In November and December 1995 the rent went unpaid and the defendant began to buy beer from unauthorised suppliers. Following further defaults in 1996, the plaintiff issued proceedings claiming possession, arrears of rent, mesne profits and damages for breach of covenant. In his defence and counterclaim for damages and rescission the defendant alleged that he had been induced to enter into the lease by misrepresentations made by B. The judge, having found that the vendors had made various misrepresentations in their dealings with B and others, proceeded to consider whether a similar complaint could be made against the plaintiff.
Held Judgment was given for the plaintiff.
1. A statement of opinion could involve a statement of fact where the facts are not equally known to both sides. In such a case the statement of opinion by the better informed party very often implied that the maker of the statement knew facts which justified his opinion: see Smith v Land and House Property Corporation (1884) 28 ChD 7 per Bowen LJ at p15, as approved and applied in Bisset v Wilkinson [1927] AC 177 and in Economides v Commercial Union Assurance Co plc [1997] 3 All ER 636.
2. Given the size and experience of the plaintiff and the fact that it had received the information at first hand, the plaintiff did have a duty to the defendant to have reasonable grounds for its belief: see Brown v Raphael [1958] Ch 636 per Lord Evershed MR at p642. However, having regard to the investigations carried out by B and the difficulty of assessing the volume of unrecorded business, it was clear that the opinions expressed by B were not only honestly held, but had a reasonable basis.
Guy Fetherstonhaugh (instructed by Pilgrims, of Bedford) appeared for the plaintiff; Christopher Spratt (instructed by Kingsford Stacey Blackwell) appeared for the defandant.