S Pearson & Son Ltd v Dublin Corporation [1907] AC 351
The House of Lords held that contractual provisions requiring a contractor to check information for itself did not prevent an allegation of fraudulent misrepresentation from going to the jury. It ordered a new trial; it did not itself find that fraud had been proved.
Facts and proceedings
Dublin Corporation engaged Pearson to construct sewage works. Engineers employed by the corporation prepared plans showing an existing harbour wall extending nine feet below Ordnance datum. The depth of the wall materially affected the work required and the contractor’s tender price. Pearson alleged that the plans misrepresented the position and had induced it to tender at a lower price than it otherwise would have offered.
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The contract required the contractor to satisfy itself about the dimensions, levels and nature of existing works and to obtain its own information. Other provisions disclaimed responsibility for inaccuracies in the plans. The corporation argued that these terms prevented Pearson from relying on the information supplied.
At trial, Palles CB withdrew the claim from the jury and gave judgment for the corporation. A majority of the King’s Bench Division ordered a new trial, but the Court of Appeal in Ireland restored the trial judge’s decision. Pearson appealed to the House of Lords.
Could the contractual clauses defeat the fraud claim?
The House held that there was evidence which a jury could consider when deciding whether the engineers had made false representations knowingly or with reckless indifference to their truth, and whether Pearson had relied on them to its detriment.
The distinction was between an honest inaccuracy and fraud. The clauses contemplated honest dealing and protected against mistakes; they did not, properly construed, protect against the fraudulent conduct alleged. They therefore did not justify withholding the factual questions from the jury.
Lord Loreburn stated that a person could not escape liability for their own fraudulent statements merely by inserting a clause saying that the other party should not rely on them. He did not decide that an innocent principal could never, in any circumstances, use apt and express wording to address liability for an agent’s fraud. It was enough that the clauses in this contract did not do so.
The corporation and its engineers
The corporation also argued that it had innocently supplied the plans, while the engineers who allegedly possessed the relevant knowledge had not themselves communicated with Pearson.
The House rejected that separation of responsibility. The engineers had prepared the plans within their authority for use by tendering contractors. Passing the plans through the corporation did not prevent the corporation from being responsible if its agents’ fraud was established. It was not necessary for the person who physically communicated the representation also to be the person with the guilty knowledge.
Decision
The appeal was allowed and a new trial ordered. The corporation was to pay the costs in the House of Lords and the Court of Appeal; the costs of the first trial were left to depend on the eventual result.
The decision established that the contractual and agency arguments did not bar the claim. Whether fraud had actually occurred remained for determination at the new trial. The House did not assess damages.
Judgment: S Pearson & Son Ltd v Dublin Corporation [1907] UKHL 960; 45 SLR 960.
