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Abdul Kassim v. State Of Kerala .
Judgment Summary — Mathew, J.
Factual and Procedural Background
The plaintiff (appellant) bought, in a single revenue-auction sale, two items of land: 5 acres and 24 cents in Survey No. 303/1 (originally belonging to one Kochu Kunhu) together with 57 cents in Survey No. 15/2. The combined purchase price was 1,825 Sirkar rupees. It was alleged that, at the time of the revenue auction, Kochu Kunhu had no title to S. No. 303/1 because that parcel had previously been sold in execution of a decree in O.S. No. 570/112 (the mortgagee's suit), and the transferee under that decree had purchased the property earlier (in 1119). The Government Pleader had filed an application (Ext. II) in the execution suit objecting to delivery; that petition was allowed by the Munsiff but dismissed in revision. The revenue-sale proclamation (Ext. D.3, dated 18th Thulam 1122) described S. No. 303/1 as being the equity of redemption of Kochu Kunhu. The revenue sale took place on 30th Thulam 1122; the plaintiff received possession from the State, but subsequently the auction-purchaser under O.S. No. 570/112 recovered possession of S. No. 303/1 from the plaintiff.
The plaintiff's suit sought recovery of the proportionate part of the purchase money from the State, alleging that Kochu Kunhu had no title to S. No. 303/1 at the time of the revenue sale. The plaintiff later sold S. No. 15/2 for Rs. 300 (Ext. P.5) and sought a refund of the remainder (with interest) attributable to S. No. 303/1. The State (defendant) contended there is no warranty of title in a revenue sale, that the plaintiff knew of the defect in title, and that no relief was due. The trial court held there is no warranty of title in a revenue sale and that the plaintiff was not entitled to relief because there was no total failure of consideration. The plaintiff appealed.
Legal Issues Presented
- Whether the plaintiff (auction purchaser in a revenue sale) is entitled to a refund of the proportionate purchase money on the ground that S. No. 303/1 had already been sold in execution and therefore there was a total or partial failure of consideration.
- Whether a revenue-sale proclamation that represented the defaulter as having the equity of redemption (when in truth the property had been sold in execution) amounts to actionable fraud by the State making the State liable to the purchaser for damages or restitution.
- Whether knowledge of one State agent (the Government Pleader) of the prior execution sale can be imputed to the officer who made the proclamation (the Tahsildar) so as to constitute actionable misrepresentation or fraud imputed to the State.
- Whether, alternatively, the Tahsildar's alleged negligent or careless representation (innocent misrepresentation) in the proclamation could give rise to a claim in damages or other relief (recognizing the pleading/timing constraints in this case).
Arguments of the Parties
Appellant's Arguments
- The plaintiff contended that S. No. 303/1 had already been sold in execution (O.S. No. 570/112) and therefore Kochu Kunhu had no title at the time of the revenue sale; consequently there was a failure of consideration in relation to that item and the plaintiff was entitled to recover the proportionate purchase money from the State.
- The appellant further argued that the State, by proclamation, represented that Kochu Kunhu had the equity of redemption in S. No. 303/1 while being aware (through its officers) that he had no title; that representation was fraudulent and the plaintiff was entitled to damages or compensation from the State.
- In the alternative, the appellant suggested that the State's misrepresentation (or negligent misstatement) induced the purchase and therefore gave rise to a cause of action for compensation or restitution.
Respondent's (State's) Arguments
- The State contended that there is no warranty of title in a sale in invitum (revenue sale), and therefore the plaintiff cannot claim on a warranty theory.
- The State further contended the plaintiff was aware of the want of title to S. No. 303/1 and therefore was not entitled to relief.
- The State implicitly relied upon the principle that, where two items are sold in one lot for a single consideration, there is no basis for a claim that the consideration failed in toto or that the purchase money can be apportioned when apportionment is impracticable.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Mathai v. O. Oommen (A.I.R. 1963 Kerala 148 : 1962 K.L.J 540) | Affirms decisions that an auction purchaser may sue to recover purchase money as money had and received where there is a total failure of consideration. | The court cited and followed the principle as applicable to the present facts (although the present case arises under the Revenue Recovery Act) to acknowledge the availability of such a remedy where total failure of consideration is shown. |
| Firm Narasingi Vannechand v. Narasayya (A.I.R. 1945 Mad. 363) | Holds that when a judgment-debtor has no title to a part of the property sold in one auction lot, a suit by the auction purchaser for refund of the proportionate part of the purchase money is not maintainable (no total failure of consideration). | The court relied on this decision to support the conclusion that, because the two items were sold in one lot for a single consideration and the consideration was not severable, the plaintiff could not recover a proportionate refund. |
| Nagalinga Chettiar v. Guruswanty Ayyar (A.I.R. 1930 Mad. 856) | Same principle as Firm Narasingi: purchaser of a combined lot cannot recover proportionate purchase money where part of the lot is later found not to belong to the judgment-debtor. | The court relied on this authority as supporting precedent for denying a proportionate refund where apportionment or severance of consideration is impracticable. |
| Fibrosia Spolka Akcygna v. Fairbairn Lawson Combe Barbour Ltd. (1943 A.C. 32) | Recognizes that relief may be granted where consideration is severable — examples where part performance passed and part did not, permitting apportionment and restitution of the part not passed. | The court cited Lord Atkin's speech to show the exception where consideration is severable, but found the severability principle inapplicable to the present single-lot sale. |
| Rugg v. Minet (11 East 210) | Example (cited in Fibrosia) of a case where partial performance/severable consideration permitted recovery for the part not delivered/passed. | Referred to as an illustrative authority for the severability exception; the court concluded it could not be applied here because the consideration was not severable. |
| Sundara Gopalan v. Venkatavarada Ayyangar (I.L.R. 27 Mad. 228) | Holds that fraud will vitiate a sale in invitum — fraud is a ground for relief even where no warranty of title exists. | Cited by appellant as authority that fraud can vitiate a revenue sale; the court considered the principle but required proof that the officer who made the proclamation knew of the falsity before it could be held to constitute fraud by the State. |
| Derry v. Peek (1889) 14 A.C. 337 | Established that, to constitute actionable deceit, the person making the false representation must have been aware of its falsity (i.e., fraudulent intent or guilty knowledge is required). | The court invoked this rule to emphasise that the Tahsildar's actual knowledge of the prior execution sale must be proved to sustain a fraud claim. |
| Cornfoot v. Fowke (M. & W. Reports Vol. VI, p. 358) | Held that where an agent innocently makes a false statement (without fraudulent intent) and the principal is innocent of fraudulent intent, the principal is not liable for fraud merely because another officer knows of the true state of affairs (agent/principal liability limitations). | The court discussed this authority as representing one strand of authority on imputing knowledge between agents and principal; it noted later authorities that rejected or distinguished Cornfoot. |
| S. Pearson & Son Ltd. v. Lord Mayor, etc. of Dublin (1907 A.C. 351) | House of Lords decision holding that a principal can be liable for fraudulent misrepresentation even if the statement was made by one agent innocently, where another agent of the same principal possessed guilty knowledge — imputes guilty knowledge across agents employed by the same principal. | The court relied on this authority as support for imputing knowledge across agents in principle, but it also reviewed subsequent and conflicting authorities and recognized the tension in the authorities. |
| London County Freehold & Leasehold Properties Ltd. v. Berkley Property & Investment Co. Ltd. (1936-2 All E.R. 1039) | Held that a company/principal was liable where one agent made an innocent but untrue statement while another agent of the company knew it to be untrue; supports imputing knowledge among agents for fraud liability. | The court cited this as an important authority that repudiated Cornfoot and supported liability of a principal in such circumstances; but the court noted that authorities are not uniform and that proof of the Tahsildar's actual knowledge was absent here. |
| Armstrong v. Strain (1952-1 K.B. 232) | Holds that the principal cannot be made liable for fraud where the agent made the statement innocently and the principal (though knowing the statement was untrue) had not authorised the statement and had no knowledge that the agent was making it — i.e., contrary authority to London County. | The court cited it as a later case supporting non-imputation of fraudulent intent in some circumstances and as evidence of the conflicting state of authorities on imputation of knowledge. |
| Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. (1963-2 All E.R. 575) | Recognises liability for negligent misstatement where there is a special relationship or duty of care (House of Lords decision relevant to negligent misrepresentation claims). | The court referred to this decision while noting the appellant had raised negligence for the first time on appeal; the court declined to make any pronouncement on negligence given it was not pleaded or argued below. |
Court's Reasoning and Analysis
The court proceeded through two principal lines of analysis: (A) whether there was a recoverable failure of consideration; and (B) whether the State was liable for fraud (or negligent misrepresentation) arising from the sale proclamation.
(A) Failure of consideration / Apportionment
- The court accepted the established principle (citing earlier High Court decisions and Mathai v. O. Oommen) that an auction purchaser may, in principle, sue for recovery of purchase money as money had and received where there is a total failure of consideration.
- However, the court examined whether the present sale involved a total failure of consideration. The two parcels were sold together in one lot for a single consideration (Rs. 1,825). The plaintiff sold one parcel (S. No. 15/2) for Rs. 300, thereby obtaining title and possession as to that parcel.
- The court held that, because the sale was as a single lot and the consideration was not severable (and there was no practicable criterion to apportion the purchase price between the two items), it could not be said that the consideration failed in toto. It relied on Firm Narasingi Vannechand v. Narasayya and Nagalinga Chettiar v. Guruswanty Ayyar to support that where part of a mixed lot is invalid, the purchaser is not entitled to recover a proportionate part of the purchase money when apportionment is impracticable.
- The court acknowledged the exception (from Fibrosia and illustrative cases like Rugg v. Minet) that where consideration is severable it is open to a court to grant proportionate restitution, but found the present facts did not meet that exception.
- Conclusion on this point: the plaintiff could not succeed on the ground of failure of consideration for S. No. 303/1 because the consideration was not severable and there was no total failure.
(B) Fraud / Imputation of knowledge and negligence
- The appellant's principal alternative contention was that the State had committed fraud by proclaiming (in Ext. D.3) that the defaulter had the equity of redemption in S. No. 303/1 when, the appellant said, the State knew that the property had been sold in execution. If true, that fraudulent representation would vitiate the sale and permit recovery for damages or compensation.
- The court set out the legal principle that, to make out actionable fraud, it is necessary to show that the person making the false representation was aware of its falsity (Derry v. Peek).
- The appellant sought to attribute knowledge of the Government Pleader (who had filed Ext. II in the execution proceedings and therefore knew of the prior execution sale) to the Tahsildar who signed the revenue-sale proclamation, on the basis that both were agents or officers of the State and the State acts through its agents.
- The court reviewed the authorities on principal-and-agent liability for fraudulent misrepresentation: Cornfoot v. Fowke (older authority limiting imputation), S. Pearson & Son (House of Lords authority supporting imputation), London County Freehold v. Berkley (Court of Appeal following S. Pearson principle), and later conflicting authorities such as Armstrong v. Strain. The court noted academic criticism (Patrick Devlin) and the unsettled state of authority on whether an innocent agent's statement combined with another agent's guilty knowledge can be fused to constitute the principal's fraud.
- Crucially, the court found no evidence that the Tahsildar had actual knowledge of the prior execution-sale at the time he proclaimed the property for revenue sale. In the absence of such proof, the court was not prepared to impute the Government Pleader's knowledge to the Tahsildar and hold that the Tahsildar (or the State) committed fraud in making the proclamation.
- The appellant also raised negligence (that the Tahsildar was negligent in making the proclamation representation). The court observed that negligence had not been pleaded in the plaint nor advanced in the trial court and was raised for the first time on argument in the present appeal. The court therefore declined to decide whether a duty of care or a cause of action in negligent misstatement would arise in such circumstances (though it referenced Hedley Byrne as relevant authority), and made no pronouncement on negligence.
Holding and Implications
Final Holding: The decree of the court below is confirmed and the appeal is dismissed. The court made no order as to costs.
Implications:
- The plaintiff is not entitled to restitution of any proportionate part of the purchase money on the ground of failure of consideration for S. No. 303/1, because the two parcels were sold as a single lot for a single, non-severable consideration and apportionment was not practicable.
- The plaintiff's fraud claim against the State failed for lack of proof that the officer who made the proclamation (the Tahsildar) had actual knowledge of the prior execution sale; the court was unwilling to impute the Government Pleader's knowledge to the Tahsildar on the facts before it.
- No ruling was made on whether negligent misstatement by State officers in a sale proclamation could give rise to liability, because negligence was not pleaded or argued at trial and was raised for the first time on appeal.
- The decision resolves the dispute between these parties without establishing a broad new precedent on the imputation of knowledge among State agents beyond applying and reviewing existing authorities; the court confined itself to the evidentiary absence of actual knowledge by the Tahsildar in this case.
Order: Appeal dismissed; decree below confirmed; no order as to costs.
The Judgment of the Court was delivered by
Mathew, J.:— The plaintiff is the appellant. The suit was for recovery of damages. 5 acres and 24 cents of property in S. No. 303/1 belonged to one Kochu Kunhu. That property together with 57 cents in S. No. 15/2, was sold in one lot in revenue auction for arrears of Abkari dues due from the said Kochu Kunhu and it was purchased by the plaintiff. It was alleged that Kochu Kunhu had no title to S. No. 303/1 at the time of the revenue auction; and the suit was for recovery of the proportionate amount of the purchase money from the State. The defendant, the State of Kerala, contended that there was no warranty of title in a revenue sale, that the plaintiff was aware of the want of title of Kochu Kunhu to S. No. 303/1 and that the plaintiff was not entitled to any reliefs.
2. The court below found that there was no warranty of title in a revenue sale, and that the plaintiff was not entitled to any relief, for the reason that there was no total failure of consideration. The question for consideration in this appeal, therefore, is whether the plaintiff is entitled to a refund of the proportionate purchase money. It is admitted that originally these two properties belonged to the defaulter and that there was a subsisting mortgage on S. No. 303/1 when the State attached that property. The mortgagee instituted a suit in O.S 570/112 and obtained decree and in execution thereof the transferee of the decree purchased the property in 1119. When the auction purchaser was about to take delivery, the Government Pleader filed an application, Ext. II, in the case, objecting to delivery. Ext. II was filed on 23rd Thulam 1112. That petition was allowed by the Munsiff, but in revision the petition was dismissed. When the properties were put up for sale in the revenue case, it was stated in the sale proclamation that what was being sold in S. No. 303/1 was . Ext. D. 3 is the proclamation notice and in the relevant column the above description has been inserted. Ext. D. 3 is dated 18th Thulam 1122. The revenue sale took place on 30th Thulam 1122 and after the sale the plaintiff was given delivery of possession of the properties by the State, but soon after, the auction purchaser in O.S No. 570/112 recovered possession of S. No. 303/1 from the plaintiffs. The plaintiff's case is that so far as S. No. 303/1 is concerned, Kochu Kunhu had no title at the time of the revenue sale as that property had already been sold in execution of the decree in O.S 570/112. It was therefore argued that as there was a total failure of consideration so far as that item is concerned the plaintiff is entitled to get a refund of the proportionate amount paid by him as purchase money. Plaintiff purchased the two items for a total consideration of 1825 Sirkar rupees. He subsequently sold S. No. 15/2 for Rs. 300/- under Ext. P. 5. So the plaintiff claimed the sale amount with interest after deducting Rs. 300/-, the consideration for Ext. P. 5 sale.
4. The main ground relied upon by counsel for the appellant was that the State knew as a matter of fact that Kochu Kunhu had no title to the property when the property was put up for sale, and yet by the proclamation it was represented that Kochu Kunhu had the equity of redemption of the property, and as that representation was fraudulent, the plaintiff was entitled to damages. He also submitted that in any event as by the sale of S. No. 303/1 no right was conveyed to the plaintiff for the reason that the property had already been sold in execution in O.S 570/112, he was entitled to recover the proportionate purchase money as there was a failure of consideration to that extent.
5. Dealing with the last point first, it may be said that although there is no warranty of title in a sale in invitum, a purchaser is entitled to sue and recover the purchase money in an action for money had and received if there is a total failure of consideration. No doubt there is difference of opinion on the question whether an auction purchaser is entitled to recover the purchase money in a suit, when it turns out that the judgment-debtor has no title to the property for the reason that there is a total failure of consideration. The Madras, the Travancore, and the Travancore-Cochin High Courts have taken the view that such a suit is maintainable. In Mathai v. O. Oommen (A.I.R 1963 Kerala 148 : 1962 K.L.J 540) Madhavan Nair, J. has referred to those rulings and followed them. I think the principle laid down in those rulings can be applied to the facts of this case, although the question here arises in the context of a sale under the Revenue Recovery Act.
6. The next question is whether it is possible to give any relief to the plaintiff, in the circumstances of this case. It was submitted for the respondent that there was no total failure of consideration as the plaintiff got title to and possession of S. No. 15/2, and as both items were sold in one lot and for a single consideration, I think the argument is sound. Unless the consideration can be severed, it is impossible to find out the extent of the failure of consideration. As the sale of the two items was in one lot for a single consideration, it is difficult to say that the consideration failed in toto. There is also no criterion to apportion the consideration as between the two properties. In Firm Narasingi Vannechand v. Narasayya (A.I.R 1945 Mad. 363) it was held that when a judgment-debtor is found to have no title to a part of the property sold in auction, a suit by the auction purchaser for refund of the proportionate part of the purchase money is not maintainable. In the course of the judgment, Leach, C.J, observed:
“It must be borne in mind that there is no warranty of title in a court-sale. If the judgment-debtor has no interest in the property sold, the sale can be set aside, but, the Code says that if the judgment-debtor has some interest in the property auctioned, the sale must stand.”
7. The learned Judge relied on the decision in Nagalinga Chettiar v. Guruswanty Ayyar (A.I.R 1930 Mad. 856) in support of this proposition. In that case two items of properties were sold in one lot: it was subsequently found that the judgment-debtor had no title to one of the items. It was held that the purchaser was not entitled to recover the proportionate part of the purchase money as it cannot be said that there was a total failure of consideration.
8. No doubt if it is possible to sever the consideration it is open to the Court to grant the relief. That is clear from the speech of Lord Atkin in Fibrosia Spolka Akcygna v. Fairbairn Lawson Comba Barbour Ltd. (1943 A.C 32). His Lordship there referred to certain cases where reliefs were granted on the ground that consideration was severable.
“……..where a contract to deliever wood was prevented by the defendant preventing performance by not loading all the wood; Rugg v. Minet (11 East. 210), where the buyer had paid part of the purchase price on a sale of turpentine in casks, where the property in some casks had passed while in seller's warehouse, but in some had not, and the purchaser was entitled to recover as money had and received the proportion properly attributable to the casks in which the property had not passed.”
9. But it is difficult to apply that principle to this-case as it cannot be said that the consideration is severable. Hence I think the plaintiff cannot succeed on the ground that the consideration for the sale of S. No. 303/1 failed.
10. The more formidable argument advanced by counsel for the appellant was that the State was guilty of fraud in having put up the property for sale, when as a matter of fact, it knew that the defaulter had no title to the property. The argument was elaborated in this way: The State, being a corporation can only act through its agents or representatives and that knowledge of one agent must be attributed to another agent. It is clear from Ext. II that the Government Pleader who filed that application was aware of the auction sale in execution of the decree in O.S 570/112, and that the High Court had repelled the objections of the State to the delivery of the property to the auction purchaser in that case, and if the State, through one of its agents knew at the time when the revenue sale was conducted that the defaulter had no title at all to the property, and if that property was proclaimed for sale stating that the defaulter had the equity of redemption in that property, the State was guilty of fraud, and if on account of that fraud the plaintiff sustained damage, the plaintiff was entitled to recover compensation for the same from the State. In this connection counsel referred me to the ruling in Sundara Gopalan v. Venkatavarada Ayyangar (I.L.R 27 Mad. 228) for the proposition that fraud would vitiate a sale in invitum, even if there is no warranty of title in such a sale. At page 231 Muthuswamy Iyer, J. said:
“I do not desire to be understood as suggesting that in case of fraud there would be no remedy, but this is not that case. What I hold is that where the Court sale is not vitiated by fraud, the only extent, to which the purchaser can claim relief, is that indicated by section 315…………”
11. But in order to make out a case of fraud against the State it must be proved that the agent making the representation was aware of the sale of the property in execution of the decree in O.S 570/112 when the property was put up for auction in the revenue case.
12. The whole argument of the appellant proceeded on the assumption that the State is liable for the fraud of its officers while acting in the discharge of their statutory duties. It is doubtful whether the State, when it acts in its sovereign capacity through its agents or officers, can be made liable for their tortious acts, even when they act within the scope of their employment. Assuming that the fraud makes the sale void, in order to constitute fraud, it is well-known, that the person making the statement must have been aware of the falsity of the statement. See Derry v. Peak ((1889) 14 A.C 337). So it has to be proved that the Tahsildar had the knowledge of the sale in execution of the decree in O.S 570/112. There is no proof in this case that the Tahsildar had actual knowledge of the sale and that it was with that knowledge that he proclaimed the property for sale. But it was argued that knowledge must be imputed to him because at any rate, the Government Pleader, the other agent of the State, was aware of the sale When an agent makes a statement and the agent is ignorant of the falsity of that statement, but principal or another agent is aware of its falsity, but does not know or believe that the agent will make the statement, the question whether the principal is liable fraud has come up for consideration. In Cornfoot v. Fowke (M. & W. Reports Vol. VI, page 358) the owner of a house employed an agent to let the house to a third person. Asked by a prospective tenant whether there is anything objectionable about the house the agent replied ‘nothing whatever’. Yet the agent did not know, that in the next door there was a brothel. The tenant failed to complete the agreement and sued the principal for damages. Parke B., discussing the question of fraud made the following observation at page 373:
“Now the simple facts, that the plaintiff knew of the existence of the nuisance, and that and the agent though he makes one, does not know it to be false, and it seems to me to be an untenable proposition that if each be innocent, the act of either or both can be a fraud. No case could be found in which such a principle is laid down, as was admitted in the course of the argument. It must be conceded, that if one employs an agent to make a contract and that agent, though the principal be perfectly guiltless, knowingly commits a fraud in making it not only is the contract void, but the principal is liable to an action…………But, in the present case, the agent acted without any fraudulent intent; and therefore his act alone neither renders the plaintiff liable to an action nor vitiates the contract.”
13. This case did not meet with approval of the House of Lords in S. Pearson an Son limited v. Lord Mayor, etc. of Dublin (1907 A.C 351) There the defendant had invited the plaintiffs, to tender for certain sewage work and for the purpose enabling them to tender, plans with drawings and specifications were given to the plaintiffs by the defendant. These plans and drawings and specifications had been prepared by engineers employed by the corporation and in these drawings and plans were certain statements as to the relevant circumstances of the work. In particular there was a statement as to the existence of a wall at a depth of 9 feet. The only relevance of that was that if the statement was true the cost of the work will be less. Relying on the truth of the statement the contractors agreed to do the work for a sum. But they found that the statement was wholly untrue and therefore they incurred very much more expense. They filed an action for damages for fraud, was held by the House of Lords that it cannot be said that the principal was not guilty of fraud. Lord Halsbury said at page 357:
“I do not understand the learned Judge to express any doubt as to the liability of the principals for the fraud of their agent, if there was fraud…………..if it was supposed to decide that the principals and agent could be so divided in responsibility that—like the school boy's game of “I did not take it, I have not got it”—the united principal and agent might commit fraud with impunity, it would be quite new to our jurisprudence. One of the learned Judges who decided the case of Cornfoot v. Fowke explained it by saying that it was only decided on a point of pleading, and another by saying that it was attempted to add a term to a written contract which was not in it. Whether these were satisfactory reasons I do not cap to inquire. It is enough to say that the case is not law if it is supposed to affirm the position to which I have referred………………………………..I cannot conclude without saying that I desire to associate myself entirely with the observations which have been made by the Lord Chancellor, that it matters not in respect of principal and agent (who represent but one person) which of them possesses the guilty knowledge or which of them makes the incriminating statement. If between them the misrepresentation is made so as to induce the wrong, and thereby damages are caused, it matters not which is the person who makes the representation or which is the person who has the guilty knowledge.”
14. In London County Freehold and Leasehold Properties Ltd. v. Berkley Property and Investment Co. Ltd., (1936-2 All E.R 1039), the same question came up for consideration, and it was held that the principal was liable for fraud. In that case a person was about to buy a block of flats from a company, and he wanted to know whether the tenants paid the rent regularly. Thereupon one of the company's agents, Mr. De Rees, consulted another agent of the company namely the property manager, Mr. Addis, and then informed the purchaser that the tenants paid the rent regularly, when in fact many did hot. Goddard, J., held that the company cannot be made liable for any fraud. The court of appeal took the opposite view that the company was liable for fraud. One reason was that one of the company's agents had been fraudulent so that the ordinary rule of vicarious liability applies. According to a second and more substantial reason, however, the company was liable in fraud for Mr. De Ree's false but innocent representation, which the company through its agent Mr. Addis knew to be untrue, eventhough the company did not know that Mr. De Rees made the statement. It followed from this that the company would be liable where one of its agents made an innocent though untrue statement, provided that the statement was known to be untrue by any other agent or officer of the company. It is obvious that this case repudiated the authority of Cornfoot v. Fowke (M. and W. Reports, Vol. VI page 358). In the course of the judgment, Slesser, L.J, after quoting the observations of Lord Loreburn L.C, and Lord Halsbury in S. Pearson and Son case (1907 A.C 351), said at page 1047:
“For” myself, I cannot see why if the physical act of several agents may collectively be deemed in law to be joint responsibility of a principal, the same principal should not apply to states of mind. The agent and principal are in law one for the purpose of the acts which make up the fraudulent misrepresentation; and equally the same considerations apply if, as here, both Mr. De Rees and Mr. Addis were servants of the same corporation and the ingredients of the fraud are all to be found in the acts of the agents of one principal.”
15. At page 1050 M. Romer, L.J, made the following observation:
“There was at one time a difference of judicial opinion upon the question whether a representation made by an agent innocently on behalf of a principal can be treated as a fraudulent representation for which the principal is liable, when the principal though having no knowledge that the representation is made, knows that it is untre. But it has now been laid down by the House of Lords that in such a case the principal is as much liable as though he had himself made the representation knowing it to be untrue.”
16. In a still later case, Amstrong v. Strain (1952-1. K.B 232) the question again came up for consideration, and it was held that the principal cannot be made liable for fraud in such circumstances. In that case an estate agent sold a bungalow to a purchaser on behalf of the principal. The agent told the purchaser that any building society would lend half the purchase money on it, a statement which turned out to be untrue. The principal had not authorised the agent's statement nor did he know that the agent was making it. But he knew that the statement was untrue; and had he made the statement himself it would certainly have been fraudulent. Suing in fraud the purchaser argued that the principle of London County Case applied, that is, that despite their ‘innocent division’, the principal and agent were one in law, which made the principal liable. But judgment went against the purchaser. Two courts confidently reaffirmed Cornfoot v. Fowke (M. and W. Reports Vol. VI, page 358). The result therefore is that we are back where we began with the doctrine of Cornfoot v. Fowke (M. and W. Reports Vol. VI, page 358), stronger than ever. In the course of the judgment it was observed by Singleton, L.J, that the decision of the House of Lords referred to above was not conclusive, and that he found great difficulty in finding actual fraud when the agent did not know the false character of the statement made by him. The same view was taken by Birkett, L.J
17. The whole question was reviewed by Patrick Devlin in an article contributed by him to the Law Quarterly Review, Vol. 53, page 344 and his conclusion is that the decision in London County Council case was not right. At page 362 it is stated:
“There is no way of combining an innocent principal and agent so as to produce dishonesty. You may add knowledge to knowledge or, as Slesser L.J, put it, state of mind to state of mind. But you cannot add an innocent state of mind to an innocent state of mind and get as a result a dishonest state of mind. You cannot add innocent knowledge to innocent knowledge and get guilty knowledge. If it be possible to fuse a number of states of mind together and from the composition thereby obtained to pistil a notional dishonesty, it might be possible to satisfy the requirements for an action of deceit, even in the case of an innocent division of the ingredients. But to do this would be to go far beyond any principle of law that has yet been laid down………………There is no possible way known to philosophy or psychology by which an intent can be divided; and no possible reason why the law should try to invent one.”
18. This being the state of authorities, in the absence of any evidence that the Tahsildar was actually aware of the sale in execution in O.S No. 570/112, I do not think I will be justified in imputing the knowledge of the other agent or supposed vicarious knowledge of the State through that agent to the Tahsildar and finding fraud in him for making the statement in the proclamation so as to make the State vicariously liable for fraud. The other point argued was that the Tahsildar was negligent in making the statement in the proclamation about the right, title and interest of the defaulter as regards Survey No. 303/1 and that negligent statement induced the plaintiff to purchase the property, and as he has sustained damages on account of it, the State must be made to answer for it in damages. The case of negligence was not pleaded in the plaint or advanced in argument in the court below. It is raised for the first time at the time of argument here. I do not wish to make any pronouncement on the question whether there is any duty to be careful in making a statement of this character in the proclamation, or whether there is any special relationship between the State, when it puts up a property for sale, and the public, which implies a duty, to be careful in making a representation of this nature, or whether the purchaser would have a remedy in damages for negligence for innocent misrepresentation in a case where there is a duty to be careful or a special relationship—implying that duty—in view of the recent decision of the House of Lords in Hedley Byrne and Co. Ltd. v. Helbert and Partners Ltd. (1963-2 All E.R 575.)
20. In the result, I confirm the decree of the court below and dismiss this appeal, but in the circumstances I make no order as to costs.
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