FALSE REPRESENTATIONS

Evening Post, Volume LXXXIX, Issue 66, 19 March 1915, Page 8

FALSE REPRESENTATIONS

♦ PURCHASE OF A BOOT BUSINESS SUPREME COURT JUDGMENT. Judgment was given by his Honour Mr. Justice Edwards to-day in the case i.i which Frank Charles Farrow sued Louis Henry Hoare for the sum of £2500 as damages for false representations, whereby the plaintiff was induced to purchase a business from the defendant. The plaintiff also sued separately for a further sum of £35 as damages for breach of contract. In giving judgment, his Honour said the representations alleged were that the defendant, with a view to inducing the plaintiff to purchase the defendant's business as an importer and indentor of boots, etc., represented to him that he, the defendant, had made in such business, during a period of about twelve years, an average profit of £1500 a year, in spite of the fact that he had been robbed of £3000 by a manager whom he had left in charge during his absence on a visit to England; that the defendant further represented that he was giving the plaintiff £30 a week for £6 a week, meaning thereby that the said business was then producing a net profit of £30 per week, or £1500 a year; that the defendant further represented to the plaintiff that after he (the defendant) had purchased the said business he had paid to his stepmother the purchase money of the business at the rate of £100 per month ; and that the business had not gone back, and that the same thing could be done again at the then present day. The plaintiff further alleged that he was induced by these representations to purchase the defendant's business at the price of £1750, and to enter into an agreement to pay that sum and other moneys to the defendant by certain instalments, and to execute in favour of the defendant a mortgage over certain freehold properties of the plaintiff to secure the payment of such moneys and interest thereon. All the representations so alleged were alleged to have been untrue to the knowledge of the defendant. The defendant denied that the alleged representations were ever made, and denied that, if made, they were acted upon by the plaintiff. His Honour said he did not think the evidence established that the total of the defendant's profits during the whole period of twelve years divided by twelve would show that an average profit of anything like £1500 per annum had been made ; but even if that were' so, and if that was ordinarily the proper mode at arriving at an average, it appeared to him that, if during the last two years of that period his total profits did not exceed in the first of those two years £415, and in the other year £530, as shown by his income tax assessments, the defendant's statement that his net profits averaged £1500 & year was misleading, and calculated to mislead. Those representations, his Honour remarked later in his judgment, were made after the defendant's controversy with the Income Tax Department had resulted in the assessment of his income for the two immediately preceding years at £415 and £530 respectively. "If for these two years," continued his Honour, " the defendant's profits did actually exceed those sums, it lay upon him to establish that fact affirmatively, and he has not established it. If during those two years the defendant's profits did not exceed £415 and £530, then either his representation that he had paid off the purchase moneys of the business out of the business at the rate of £100 per month was false, or his representation that the business had not gone back wa3 false. In either case the representation that the purchase moneys of the business could be paid off out of the business at the rate of £100 per month was false. These were certainly material representations, so material to the knowledge of tho defendant, that the plaintiff relied upon the profits of tho business to enable him to acquit himself of tho very heavy obligations which- he was undertaking. They were certainly false to the knowledge of the defendant, who must have thoroughly considered his profits in connection with his income tax assessments, and who could have been in no doubt as to the result of that investigation. ... I do not think, therefore, that the case depends in material matters upon the evidence of the plaintiff and his wife, but if it does I see no reason to discredit their testimony. On the other hand, tho defendant has put himself into a position in which it is plain that his evidence can be accepted only with the greatest caution. I have already dealt with his income tax returns for two years. His books, which have passed into the possession of the plaintiff, contain no record of the payment of income tax for any other year. The books are said to have been well and carefully, kept. Tho absence of any such record appears to show, therefore, that for a period of ten years the defendant, to use the mildest language possible, successfully evaded payment of income tax, although he how asks the Court to believe that he, was making an average income of £1500 per annum. His letter to the Income Tax Commissioner shows under his own signature that he represented to the Commissioner that he had made a loss in one of the two years for which he subsequently paid income tax — as on an income of £415. In my opinion, therefore, the plaintiff has established his first cause of action. The goodwill of the business which he has been induced to buy is, so far as I can form an opinion, quite valueless. In respect of his first cause of action the plaintiff will, therefore, have judgment for the sum of £1750." In respect of the second cause of action, his Honour gave judgment for plaintiff for £5. ■ Costs were awarded according to scale, with an extra allowance of £15 15s for each of two extra days. Mr. H. F. Yon Haast appeared for plaintiff, and Mr. C P. Skerrett, K.C., with him Mr. V. B. Willis, for the defendant. After argument it was agreed that the amount of the judgment shall be given credit for by the defendant in part reduction of the mortgage to secure the purchase money of the business.

At the Magistrate's Court to-day Stanley Burgess, jeweller, was fined £1 and costs for failing to close his shop at the proper time, viz., 9 p.m. Mr. W. Slaughter appeared for the Labour Department. Two men, William Watters and Joseph Nidd appeared before Messrs. Cudby, Chapman, and Hogarth, Justices of the Peace, at the Lower Hutt Court to-day, to answer a charge of stealing two bags of chaff, valued at about 16s. Some bags of chaff were left on the side of the road at Silverstream by the owner, who, returning later, found the goods missing. When apprehended the accused stated that they had found the chaff in the middle of the road. This story did not satisfy the Bench, and the accused, for whom Mr. H. F. O'Leary appeared, were each fined 40s, with costs (7s 6d). Default was fixed at seven days in gaol. Mr. Joh. JE. Lindberg, Draper. _ Cubastreet, advertises tho arrival of a shipment of new goods which will be offered at Mile prioM to-morrow,