ProfessorMelissa A. Hale
CaseCast™ – "What you need to know"
Brief Fact Summary. Plaintiff brought suit after it bought shares in Defendant’s company, under the belief that Defendant would have the right to use steam power, as opposed to other companies, which would not.
Synopsis of Rule of Law. Misrepresentation, alone, is not sufficient to prove deceit.
Issue. Whether it is deceit when a company forms a prospectus to solicit investors, which later proves to be wrong?
The House of Lords reversed the judgment of the court of appeals, and reinstated the judgment of the lower court. The court found this to be an action of deceit, under which the establishment of misrepresentation alone is not enough to prove liability. In this case, Plaintiff relied on the prospectus, which may have been misrepresentation, but Defendants reasonably believed they could glean approval of the board of trade and should not be held liable for their later failure to do so.
Discussion. An action of deceit will only stand in a court when a plaintiff can show not only misrepresentation, but also that defendants knew they would be unable to follow through with their representations.