The Rise and Destruction of the Jurisdiction to Make Good Representations[665]
By the turn of the nineteenth century Chancery had accepted that a person who knew, or who because of his position should have known, a fact that would induce or deter a person from entering into a dealing or engagement with another, but who misrepresented the true position to that person (whether knowingly or otherwise), could be held liable in equity to the representee who acted upon the misrepresentation.
Likewise, a person who made a representation of intention that he would do an act which induced the representee to enter into a relationship or dealing in consequence of the representation could be held liable to the represenÂtee if the representation was not later made good.The usual cases—and they were few—related, first, to misrepresentations by such a person as to whether there were outstanding prior claims on, or interests in, property which the representee was considering purchasing or otherwise taking an interest in;[666] secondly, to misrepresentations about the financial position of a person with whom the representee was considering dealing;[667] and thirdly, to misrepresentaÂtions made as inducements to a prospective suitor to secure a favourable marriage for one's child.[668] In requiring the representation to be made good, equity used the remedial flexibility it possessed—hence resort to mandatory orders;[669] to orders against the representor to repay the purchase price paid on rescission if the vendor was unable to do so; or simply, to pay compensation for the relying party's loss.
One of the most significant illustrations of the compensatory jurisdiction was Burrowes v Lock.[670] An intending purchaser of a beneficiary's share in a trust fund asked the trustee of the fund whether the beneficiary was absolutely entitled to his share. The trustee represented such was the case and that a good assignment could be made.
The share was in fact encumbered and the trustee had notice of this. Though the trustee maintained he did not recollect the prior encumbrance, he was obliged to make good his representation and to compensate the plaintiff for the shortfall if the assignor-beneficiary could not make up the deficiency. As the Master of the Rolls indicated, all the plaintiff need show was:1st, that the fact, as represented, is false; 2dly, that the person making the representation, had a knowledge of a fact, contrary to it. The Plaintiff cannot dive into the secret recesses of his heart: so as to know, whether he did or did not recollect the fact; and it is no excuse to say, he did not recollect it. At least it was gross negligence to take upon him to aver positively and distinctly, that [the beneficiary] was entitled to the whole fund, without giving himself the trouble to recollect, whether the fact was so or not.[671]
Importantly what was not needed to be shown was dishonesty (or ‘moral fraud').
By the mid-nineteenth century a significant body of judicial opinion could be mustered for the view that equity had a jurisdiction to compel the making good of representations of fact or intention, at least in some settings where detriment would be suffered if they were false or allowed to be falsified. It likewise would grant compensation where they could not be made good.[672] Representative stateÂments of the time were:
A representation made by one party for the purpose of influencing the conduct of the other party, and acted on by him, will in general be sufficient to entitle him to the assisÂtance of this court for the purpose of realizing such representation.[673]
If a man who makes to another person, upon a solemn occasion, an assertion upon which that person acts, he lies under an obligation to make good his assertion.[674]
[The principle of] enforcement of a careful adherence to truth in all the dealings of mankind... applies to all representations made on the faith of which other persons enter into engagements, so that whether the representation were true or false, at the time when it was made, he who made it shall not only be restrained from falsifying it thereafter, but shall, if necessary, be compelled to make good the truth of that which he asserted.[675]
Examples of their application—all later overruled or reinterpreted—were: (1) Loffus v Maw[676] where trusts were imposed on certain properties of a testator in favour of his niece, the testator having induced his niece to act as his houseÂkeeper on the representation (not in fact honoured) that they would be left to her in his will; (2) Slim v Croucher,[677] where a lessor was held liable to compensate a lender who had requested and received written confirmation from the lessor of his intention (later implemented) to grant the lease to the borrower which was to be used as security for the loan but which security was worthless as the lessor had already granted the lease to the borrower who had assigned it for value; and (3) Hammersley v De Biel[678] where a father's estate was held liable to pay £10,000, the father, in connection with marriage proposals, having induced a suitor to marry his daughter on the representation that that sum was to be settled upon her and her future children by his will.
Though some antiquity was claimed for some manifestations of this jurisdiction,[679] it needs to be acknowledged that it was never blessed with a coherÂent and discerning doctrinal expression. Sir John Romilly, its principal exponent in the mid-nineteenth century, found its justification in the unhelpful aspiraÂtion of ‘ enforcing truth in all the transactions of mankind'. [680] [681] And Story in his Commentaries43 found the principles governing representations to be so consoÂnant to the dictates of natural justice, that it required no argument to enforce or support them.[682] Complicating even contemporary appreciations of equity's role in enforcing representations were the uncertainties and misapprehensions which existed in the minds of some judges as to the relationship of equity's rules to those of the common law. To the extent that equity was requiring the making good of repreÂsentations of intention and of voluntary promises, this gave them ‘ all the force of a binding contract',[683] and to some judges, and notably Lord Cranworth, this was because the representations were ‘so made as to constitute the ground of a contract'.[684] The language of contract bedevilled many of the equity cases.[685] [686] SimiÂlarly, when equity was decreeing compensation for the loss suffered by reliance on a false representation, a number of judges were to assert that they were exercising a jurisdiction concurrent with that for which the common law provided a damages remedy—albeit Chancery provided a more suitable procedure for dealing with these cases. So Slim v Croucher[687]—one of the compensation jurisdiction's notaÂble examples—was decided on the understanding that an action at law also lay. If these equations were often erroneous, they nonetheless contained the seeds of destruction for an equitable jurisdiction which could require the making good of representations and could compensate for their being false or falsified. III.