Edington v Fitzmaurice - Thomson Reuters

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me in so many words, not only that such objects are in your mind, but that if I giveyou so much money towards that, or if 100 other subscribers give you the whole orpart of the £25,000, you are able with reasonable certainty to employ any moneysubscribed on the faith of your words in doing the things which you tell me it is yourobject by this issue to obtain. The Lord Justice Mellish, in Ex parte Whittaker [FN21]says, that if it were clearly made out that at the time there was no intention to pay heshould consider that a case of fraudulent misrepresentation had been shewn. I thinkthat this statement, if not substantially false, is, looking at the whole of the case, amost reckless statement, one shewing an amount of sanguineness which, if reallyentertained, was under the circumstances, as against people who are asked toadvance their money, of the most gambling and speculative character, and on thatground also the Plaintiff is entitled to recover.FN21 Law Rep. 10 Ch. 446.I have already stated that I think Major Clench who played a leading part in verymany of these transactions is quite as liable as the other directors. I feel very sorryfor Colonel Snow, because at one period he seems to have protested against thatwhich I think was very wrong as regards some of the statements they were making tothe subscribers. Still, with his eyes open, he was a party to the prospectus, and thePlaintiff ought not to be *476 deprived of such security as he may get from ajudgment against Colonel Snow as well as against the others. [His Lordship thenconsidered the case against Hunt, coming to the conclusion that he was merely aservant of the company and was not liable, nor was Hanley. His Lordship gavejudgment against the five directors for £1500 less £45 received as interest on thedebentures. As against Hunt and Hanley he dismissed the action, but without costs,as they ought to have been mere cautious.](C. M.)From this judgment the Defendants <strong>Fitzmaurice</strong>, Rich, Snow, Taylor, and Clenchappealed. The appeal came on for hearing on the 27th of February, 1885.Davey, Q.C., Crossley, Q.C., and A. Young, for the Appellants:--The first ground of complaint put forth in the pleadings, namely, that the prospectuswas so framed as to lead the public to believe that the holders of debentures wouldhave a charge upon the property of the company, has been virtually given up. ThePlaintiff's expectation of having such a charge was simply his own mistake, assisted, itmay be, by the unauthorized statements of the secretary and manager, for which thecompany are not responsible. And if there had been anything in the circular to lead tothat expectation, the Plaintiff's remedy would have been an action for specificperformance of the contract for a charge, not an action for deceit.In order to maintain this action the Plaintiff must shew not only that the statementsmade by the Defendants were false, but that they were false to their knowledge, andthat he was induced by those statements to advance his money.With respect to the omission of the mortgage to Hores & Pattisson for £5000, ouranswer is, that the circular did not profess to state all the liabilities to which thecompany's property was liable. It was only intended to shew the condition and valueof the property when they bought it. As the directors were not offering a charge onthe property, there was no reason for them to set out all the incumbrances on it. The£5000 advance was only a temporary loan, which was expended on the improvement*477 of the property, and was to be paid off in a few months. The mere omission of afact in a statement will not sustain an action for deceit: Arkwright v. Newbold [FN22].FN22 17 Ch. D. 301.With respect to the statement as to the first mortgage, the directors have sworn thatthey were themselves ignorant of the exact terms of it, and supposed that the wholewas to be paid off by instalments. The property was bought subject to the mortgage,and the mortgage deed was not in their possession. There is no evidence of anyintention to deceive the public, nor could the misstatement have any effect on thosewho were willing to advance money. The Plaintiff says that he relied upon thedebentures giving him a charge. If so, the alleged misstatement was immaterial to
him; he knew that he took subject to the first mortgage, and it made no difference inwhat way it was to be paid off.The last point relied on by the Plaintiff is the misstatement as to the object for whichthe loan was required. In the first place, the directors had a bonâ fide intention at thetime of expending the money, or a substantial part of it, in the way proposed. Theevidence clearly shews that they were sanguine as to the ultimate success of theconcern. And they did in fact apply some of it in this way. Moreover, the loan fromHores & Pattisson had been expended in the improvement of the property, andtherefore paying off that loan was practically an employment of the money in the wayproposed.But, secondly, the Plaintiff was not misled by this statement, whether it wasinaccurate or not. He says himself that he was induced to lend his money by the beliefthat he would have a charge on the property, and this is admitted to be a mistake. Sothat it was his own mistake that misled him, and therefore the statements of thecircular as to the objects in which the money was to be employed were immaterial:Smith v. Chadwick [FN23]. There was nothing more than an expression of intentionon the directors' part as to the application of the money. That is not such arepresentation as can be a ground for an action of deceit: Jorden v. Money [FN24];Maddison v. Alderson [FN25].FN23 9 App. Cas. 187.FN24 5 H. L. C. 185.FN25 8 App. Cas. 467.*478 Sir F. Herschell, S.G., Rigby, Q.C., and Willis Bund, for the Plaintiff:--The statement, which is now admitted to be untrue, as to the first mortgage, and theomission of mention of the second mortgage were not immaterial. The Plaintiffexpected to have not only a charge, but a first charge, subject only to the payment ofthe £500 instalments of the first mortgage. He would not have advanced his money ifhe had known that the property was so heavily charged. It is contended that theobjects for which the money was required were immaterial. This is a fallacy. Whetherthe Plaintiff expected to have a charge or not, it made a great difference whether thecompany was in a position to expend the money raised in improving its premises anddeveloping its business, or would have to spend the greatest part in paying offpressing liabilities. In fact, as the directors well knew, the company was in financialdifficulties, and the money was really wanted to relieve them from pressing liabilities.The intention with which the directors raised the loan is a matter of fact, which can beascertained by evidence; and it is clear from the evidence, and was so found by theJudge at the trial, that they did not really issue the debentures for the purpose ofimproving their buildings--that in fact a very small part, under £150, was spent in thismanner. Then it is said that if it was a misstatement it did not affect the Plaintiff,because he was deceived by his own mistake. But if a man is influenced in his conductby the misstatement of the defendant the defendant is not relieved from liabilitybecause the plaintiff may have also himself made a mistake. If the defendant'smisrepresentation contributed to his conduct the defendant is liable for it.Davey, in reply.COTTON, L.J.:--This case has been very fully and ably argued. It is what is called an action of deceit,the Plaintiff alleging that statements were made by the Defendants which wereuntrue, and that he had acted on the faith of those statements so as to incur damagefor which the Defendants are liable. In order to sustain such an *479 action thePlaintiff must shew that the Defendants intended that people should act on thestatements, that the statements are untrue in fact, and that the Defendants knewthem to be untrue, or made them under such circumstances that the Court mustconclude that they were careless whether they were true or not. The statements inquestion were made in a prospectus or circular issued by the Defendants for thepurpose of getting subscribers to a loan, and the Plaintiff alleges that he understood
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Edington v Fitzmaurice - Thomson Reuters

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