In Peek v. Gurney, L. R. 6 H. L. 377, Lord Cairns said (p. 403): “Mere non-disclosure of material facts, however morally censurable, however that non-disclosure might be a ground in a proper proceeding at a proper time for setting aside an allotment or a purchase of shares, would in my opinion form no ground for an action in the nature of an action for misrepresentation. There must, in my opinion, be some active misstatement of fact, or, at all events, such a partial and fragmentary statement of fact, as that the withholding of that which is not stated makes that which is stated absolutely false.”
Compare Mitchell, J., in Newell v. Randall, 32 Minn. 171, 172–73: “It is doubtless the general rule that a purchaser, when buying on credit, is not bound to disclose the facts of his financial condition. If he makes no actual misrepresentations, if he is not asked any questions, and does not give any untrue, evasive, or partial answers, his mere silence as to his general bad pecuniary condition, or his indebtedness, will not constitute a fraudulent concealment. 2 Pom. Eq. Jur. §906; Bigelow on Fraud, 36, 37. But this was not a case of mere passive non-disclosure. The object of De Laittre’s inquiry clearly was to ascertain Bauman’s financial condition and ability to pay. Bauman’s statement was in response to that inquiry, and, when he undertook to answer, he was bound to tell the whole truth, and was not at liberty to give an evasive or misleading answer, which, although literally true, was partial, containing only half the truth, and calculated to convey a false impression. The natural construction which would, under the circumstances, be put on this statement is that he had $3,300 capital in his business. It was couched in language calculated to negative the idea that this was merely the gross amount of his assets, and that he owed debts to the extent of two-thirds or the whole of that amount. Such a statement, made under the circumstances it was, might fairly and reasonably be understood as amounting to a representation that he had that amount of capital which was and would remain available, out of which to collect any debt which he might contract with plaintiff. We think this is the way in which men would ordinarily have understood it. It is immaterial that more explicit inquiries by plaintiff would have disclosed the fact of his indebtedness. It does not lie in Bauman’s mouth to say that plaintiff relied too implicitly on this general statement. To tell half a truth only is to conceal the other half. Concealment of this kind, under the circumstances, amounts to a false representation.”
[337]. The statement is taken from 37 Ch. D. 541, omitting the last part. Arguments are omitted. None of the opinions are given except portions of Lord Herschell’s.
[338]. The opinion of Stirling, J., is reported in 37 Ch. D. 550. See especially 556–558.
[339]. “Want of honest belief in the truth of what one asserts, not positive knowledge that it is false, is the essence of the wrong. A man who knows that he is making a reckless assertion about things of which he really knows nothing may not be speaking against his own belief, but he is not speaking according to it, and therefore his conduct is dishonest, and is esteemed fraud by the law.” Pollock, Law of Fraud in British India, 43.
[340]. For a criticism of the view that the directors all believed the statement, see 6 Law Quarterly Rev. 73; 5 Law Quarterly Rev. 420–422.
[341]. Schuchardt v. Allens, 1 Wall. 359; Union R. Co. v. Barnes, (C. C. A.) 64 Fed. 80; Pittsburgh Life & Trust Co. v. Northern Life Ins. Co., (C. C. A.) 148 Fed. 674; Foster v. Kennedy, 38 Ala. 359; Morton v. Scull, 23 Ark. 289; Hutchinson v. Gorman, 71 Ark. 305; Davidson v. Jordan, 47 Cal. 351; Bartholomew v. Bushnell, 20 Conn. 271; Fooks v. Waples, 1 Har. (Del.) 131; Manes v. Kenyon, 18 Ga. 291; Cooley v. King, 113 Ga. 1163; Wheeler v. Randall, 48 Ill. 182; Holdom v. Ayer, 110 Ill. 448; Herman v. Foster, 185 Ill. App. 97; Holmes v. Clark, 10 Ia. 423; Scroggin v. Wood, 87 Ia. 497; Boddy v. Henry, 113 Ia. 462; Farmers’ Stock Breeding Ass’n v. Scott, 53 Kan. 534; Campbell v. Hillman, 15 B. Mon. 508; Haynes v. Gould, 83 Me. 344; Cahill v. Applegarth, 98 Md. 493; Emerson v. Brigham, 10 Mass. 197; Pike v. Fay, 101 Mass. 134; Cole v. Cassidy, 138 Mass. 437; Holst v. Stewart, 154 Mass. 445; Lillegren v. Burns, 135 Minn. 60; Taylor v. Frost, 39 Miss. 328; Utley v. Hill, 155 Mo. 232; Allen v. Wanamaker, 31 N. J. Law, 370; Williams v. Wood, 14 Wend. 126; Marsh v. Folker, 40 N. Y. 562; Wakeman v. Dalley, 51 N. Y. 27; Kountze v. Kennedy, 147 N. Y. 124; Hamrick v. Hogg, 1 Dev. 350; Taylor v. Leith, 26 Ohio St. 428; Staines v. Shore, 16 Pa. St. 200; Erie Iron Works v. Barber, 106 Pa. St. 125; Lamberton v. Dunham, 165 Pa. St. 129; Deppen v. Light, 228 Pa. St. 79; Gibbs v. Odell, 2 Cold. 132; Weeks v. Burton, 7 Vt. 67 Accord.
In Heilbut v. Buckleton, [1913] A. C. 30, Lord Moulton said (p. 48): “In the history of English law we find many attempts to make persons responsible in damages by reason of innocent misrepresentations, and at times it has seemed as though the attempts would succeed. On the Chancery side of the Court the decisions favoring this view usually took the form of extending the scope of the action for deceit. There was a tendency to recognize the existence of what was sometimes called ‘legal fraud,’ i. e., that the making of an incorrect statement of fact without reasonable grounds, or of one which was inconsistent with information which the person had received or had the means of obtaining, entailed the same legal consequences as making it fraudulently. Such a doctrine would make a man liable for forgetfulness or mistake or even for honestly interpreting the facts known to him or drawing conclusions from them in a way which the Court did not think to be legally warranted. The high-water mark of these decisions is to be found in the judgment pronounced by the Court of Appeal in the case of Peek v. Derry, (1887) 37 Ch. D. 541; (1889) 14 App. Cas. 337, when they laid down that where a defendant has made a misstatement of fact and the Court is of opinion that he had no reasonable grounds for believing that it was true he may be made liable in an action of deceit if it has materially tended to induce the plaintiff to do an act by which he has incurred damage. But on appeal to your Lordships’ House this decision was unanimously reversed, and it was definitely laid down that, in order to establish a cause of action sounding in damages for misrepresentation, the statement must be fraudulent or, what is equivalent thereto, must be made recklessly, not caring whether it be true or not. The opinions pronounced in your Lordships’ House in that case show that both in substance and in form the decision was, and was intended to be, a reaffirmation of the old common law doctrine that actual fraud was essential to an action for deceit, and it finally settled the law that an innocent misrepresentation gives no right of action sounding in damages.
“On the Common Law side of the Court the attempts to make a person liable for an innocent misrepresentation have usually taken the form of attempts to extend the doctrine of warranty beyond its just limits and to find that a warranty existed in cases where there was nothing more than an innocent misrepresentation. The present case is, in my opinion, an instance of this. But in respect of the question of the existence of a warranty the Courts have had the advantage of an admirable enunciation of the true principle of law which was made in very early days by Holt, C. J., with respect to the contract of sale. He says: ‘An affirmation at the time of the sale is a warranty, provided it appear on evidence to be so intended.’ So far as decisions are concerned, this has, on the whole, been consistently followed in the Courts of Common Law. But from time to time there have been dicta inconsistent with it which have, unfortunately, found their way into text-books and have given rise to confusion and uncertainty in this branch of the law. For example, one often sees quoted the dictum of Bayley, J., in Cave v. Coleman, 3 Man. & Ry. 2, where, in respect of a representation made verbally during the sale of a horse, he says that ‘being made in the course of a dealing, and before the bargain was complete, it amounted to a warranty’—a proposition that is far too sweeping and cannot be supported. A still more serious deviation from the correct principle is to be found in a passage in the judgment of the Court of Appeal in DeLassalle v. Guildford, [1901] 2 K. B. 215, at p. 221, which was cited to us in the argument in the present case. In discussing the question whether a representation amounts to a warranty or not the judgment says: ‘In determining whether it was so intended, a decisive test is whether the vendor assumes to assert a fact of which the buyer is ignorant, or merely states an opinion or judgment upon a matter of which the vendor has no special knowledge, and on which the buyer may be expected also to have an opinion and to exercise his judgment.’
“With all deference to the authority of the Court that decided that case, the proposition which it thus formulates cannot be supported. It is clear that the Court did not intend to depart from the law laid down by Holt, C. J., and cited above, for in the same judgment that dictum is referred to and accepted as a correct statement of the law. It is, therefore, evident that the use of the phrase ‘decisive test’ cannot be defended. Otherwise it would be the duty of a judge to direct a jury that if a vendor states a fact of which the buyer is ignorant, they must, as a matter of law, find the existence of a warranty, whether or not the totality of the evidence shows that the parties intended the affirmation to form part of the contract; and this would be inconsistent with the law as laid down by Holt, C. J. It may well be that the features thus referred to in the judgment of the Court of Appeal in that case may be criteria of value in guiding a jury in coming to a decision whether or not a warranty was intended; but they cannot be said to furnish decisive tests, because it cannot be said as a matter of law that the presence or absence of those features is conclusive of the intention of the parties. The intention of the parties can only be deduced from the totality of the evidence, and no secondary principles of such a kind can be universally true.