Edington v Fitzmaurice - Thomson Reuters

More documents

Recommendations

Info

and that it is not a fair way of dealing with these cases to say, I take statement A.,there is nothing in it; I take statement B. there is nothing in it; and I take statementC., there is nothing in it--there is nothing in them if they stood alone, and thereforeas you cannot make three nothings into something the whole thing falls to theground. I think you must take the whole, together with its history, and then, it maybe that there is just reason for holding statement A., statement B., and statement C.to be all inaccurate, and all falling within the definition of an actionable falsestatement. There may be cases in which that is so, though, if you had only one, thedecision might be quite the other way as regards that one statement. It is quitecertain that you must always take into consideration the surrounding facts of *468the case in construing every document, and not only so, but in considering theanimus of the parties who issue that particular document.I think it is right to run through the history of this company so far as it appears fromthe documents which were put in evidence in the case, especially the minutes of themeetings of the directors.[His Lordship then read passages from the minutes of the meetings of the directors,referring to them in many cases on the question whether Clench, one of theDefendants was liable. His Lordship was of opinion that in July, 1880, the state of thefinances of the company was a matter of considerable anxiety, and that the companywas not prosperous. There were frequent meetings, and they owed money to theirbankers. In August of that year the mortgage for £5000 was made. In August, 1880,resolutions were passed for spending £110 in repairs, and £150 on horses, and £350for fish. In September, 1880, a proof of the circular was read at a meeting, so that inhis Lordship's opinion this circular was discussed at the same time when there wereconsiderable difficulties as to money. The Defendants certainly advanced their ownmoney, and it was said that this shewed bona fides on their part. On the 14th ofOctober the circular was again discussed, and again on the 19th and 28th, in all whichtime the company was in great difficulties for ready money. The minutes of thesubsequent meetings were only important on the question of bona fides. At a meetingon the 25th of November there was a resolution to lay out £150 in the purchase ofhorses, as to which his Lordship rather took the view of the Plaintiff, that it wasabsurd to suppose that for that sum they would get horses of their own. His Lordshipfeared that when the circular was issued the intention was to apply the money raisedby the debentures in payment of pressing debts. No evidence had been given of theexpenditure of the money in any purchase of horses. It appeared that £6575 hadbeen offered, and £5500 had been received by the 1st of December, nearly the wholeof which was applied in payment of then existing debts. His Lordship then expressedhis regret that the directors had not paid sufficient attention to the advice of theirsolicitors as to the form of the bond.]*469 I have been perhaps unnecessarily minute in going through the salient pointsas they appeared to me, but I have done so because it appears to me that both uponthe question of the construction of the document which is impeached, and also uponthe question of the conduct of the directors, and whether it can be looked upon asbonâ fide in all senses, or as impeachable on the grounds on which it is impeached, itis desirable to look at the surrounding circumstances and at the whole of theirconduct. It is impossible to leave out any matter bearing upon the true condition ofthe company, or bearing upon this circular, without leaving out something whichought legitimately to be taken into account in considering the questions which arebefore the Court.Now, having done that, I must look at the document itself. As I have already said, Iconsider that the action is one founded on this, and this only, as it now stands: it isan allegation by the Plaintiff that the directors were parties to this circular; that theypublished it; that it contains three specific statements which amount to statements offact which were inaccurate and misleading and not substantially true; that they atleast were most reckless in publishing this document with those statements, lookingat either the knowledge they possessed or the knowledge which they did not care topossess; and that the Plaintiff was misled by those statements and was inducedthereby, or by one or some of them, to part with his money, and that so he has losthis £1500.The document is headed "Six per cent. debenture bonds." When I first read these
onds I was myself under the impression, an erroneous impression I find, that therehad been in the opinion of Courts something to the effect that there was in the mereword "debenture" something indicating to people that the document was more than amere promise to pay, and that it amounted to something like a charge upon theproperty, or the takings, or the profits of the concern. That does not appear to be so,though it is said that through certain expressions of James, L.J., in the case of In reFlorence Land and Public Works Company [FN15], there had been an impression thatthe mere use of the word "debenture" did imply something more than in point of lawit does imply. I think, however, that it was not a very unlikely thing that the *470mere title of these bonds might, however erroneously, be supposed by persons in theposition of the Plaintiff to be a more important thing than a covenant' on the part ofthe company to pay him principal and interest, with no power on his part, whatevermight happen, to seize the property of the company at any intermediate time. Butthat was an erroneous view, and it is clear that in point of law this is nothing morethan a promise to pay under the seal of the company. The document contains,however, certain statements which no doubt must be held to be made for the purposeof inducing people to take these bonds, and they are statements relating at least tothe advantages of the company, and if they are not, they are idle and unnecessaryand irrelevant statements. If one were to speculate upon the kind of way in whichsuch statements would be discussed at a meeting (and they certainly were discussedat many meetings by the directors, though the directors remember nothing about it),one feels as certain as if one were present at one of these deliberations, that theymust have considered what they should insert and what they should not insert in thiscircular, with reference to how the public or the invited subscribers would look at it.That I think is made more certain by the minutes, which shew how often the matterdid come before the board, and how all the Defendants must have had it before themfrom time to time, and how very important it was at the time at which thosediscussions took place that they should get the money.FN15 10 Ch. D. 530.[His Lordship then read the first paragraph of the circular, as to which there was nocomplaint. But as to the statements with respect to the mortgages, his Lordship heldthat this would be of great importance, and that as the circular stated what thecharges were, that amounted to a statement that there were no other charges,whereas there was the mortgage for £5000.]If so, then the case seems to fall expressly within the language which was used inPeek v. Gurney [FN16], and which was referred to by the late Master of the Rolls inSmith v. Chadwick [FN17]. It is said in answer that they contemplated that the £5000would be soon paid off. Suppose they had said, "subject also to a mortgage to Messrs.Hores & Pattisson, of which so many thousand pounds *471 are still due and whichwe intend to be paid immediately out of these debenture bonds." How can one for amoment say that that is not a matter which might most seriously have entered intothe consideration of a person who was subscribing money upon such bonds as these?If so, is not that statement, put in that way, fragmentary, misleading and imperfect,condescending to a particular which makes it all the more misleading? Is it not areckless and a gambling statement in the mere hope that at some time, if they getsufficient money for these debentures, they may clear this debt away? Is it not amatter which in all frankness and truthfulness ought to have been stated, and whichwas deliberately not stated with a view of making the prospects more taking to thosewho would be thinking of advancing money to the company? My view is that it is animportant omission amounting to a misstatement, and therefore if the Plaintiff wasmaterially induced by that non-statement to take the debenture bonds, I think hewould have a right to complain, and if he suffered by it, to recover his money backagainst any person who had recklessly led him astray by that kind of statement.FN16 Law Rep. 6 H. L. 377.FN17 20 Ch. D. 58.
Page 4 and 5: FN6 3 Ex. D. 238.Crossley, Q.C., J.
Page 8 and 9: Then, was the Plaintiff induced by
Page 10 and 11: me in so many words, not only that
Page 12 and 13: from them that the advances were to
Page 14 and 15: misrepresentation as to the state o

Edington v Fitzmaurice - Thomson Reuters

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?