Citation. 29 Ch. 459 (1885).
Law Students: Don’t know your Studybuddy Pro login? Register here
Brief Fact Summary.
Defendants sought funding for a property and Plaintiff advanced Defendants 1500 pounds. Defendants made several misstatements to Plaintiff. Plaintiff sued Defendant for deceit.
Synopsis of Rule of Law.
In order to sustain an action for deceit, Plaintiff must first prove that there was a statement as to facts where was false; and secondly, that it was false to the knowledge of Defendants, or that they made it not caring whether it was true or false. Lastly, when you have proved that the statement was false, you must further show that the statement was wither the sole cause of Plaintiff’s act, or materially contributed to his so acting.
Plaintiff advanced 1500 pounds for debentures of a society of which Defendants were the directors and officers. To raise the funds, Defendants circulated a prospectus that announced that they had acquired a valuable property subject to a half yearly payment of 500 pounds in redemption of a mortgage of 21,500 pounds. They also stated that they would use to the money to complete alterations and additions to the buildings and purchase their own horses and vans and to further develop the arrangements for the direct supply of cheap fish. Those statements were impeached because: (1) they were framed to lead a person to believe that the debentures would be a charge on the property of the company; (2) it failed to mention a second mortgage on the property; (3) it failed to state that the entire 21,500 pound mortgage was due in full on April 5, 1884; and, (4) that the real object of the debentures was to pay off present company liabilities and that the company could not complete its pl
anned purchases of equipment as advertised. The trial court found for Plaintiffs. Defendants appealed.
Are Defendants liable to Plaintiff for deceit?
Yes. Judgment affirmed.
* In order to sustain an action for deceit, Plaintiff must first prove that there was a statement as to facts where was false; and secondly, that it was false to the knowledge of Defendants, or that they made it not caring whether it was true or false. Lastly, when you have proved that the statement was false, you must further show that the statement was wither the sole cause of Plaintiff’s act, or materially contributed to his so acting.
* In this case Plaintiff alleged three misrepresentations. First, it was said that prospectus contained an implied allegation that the mortgage for 21,500 pounds would not be called in at once, but was payable by installments. It does not appear to be clear that the statement fraudulently made by Defendants. Secondly, it is said that the prospectus contained an implied allegation that there was no other mortgage affecting the property except the mortgage stated. The Court found that although there was an implied obligation, it was not made dishonestly. If Plaintiff’s case had rested on these two allegations, it would be too uncertain for Plaintiff to succeed. However, Plaintiff’s case is made out in the third allegation. Defendant falsely stated how the money was to be spent. Defendant stated that the money was to be used to complete the alterations and additions to the buildings, to purchases horses and vans, and to develop the supply of fish. Defendants misstated the objects for whi
ch the loan was wanted, the Court did not say knowing, but so recklessly as to be fraudulent in the eye of the law.
This case sets out the prima facie elements for an action in deceit. First, Plaintiff must prove that Defendant made a statement, which was false. In this first requirement, puffing does not constitute a statement. Second, Plaintiff bears the burden to prove that Defendant made the statement knowing it was false, or with reckless disregard to its truth. This standard incorporates those false statements intentionally made and those false statements that are negligently made. Finally Plaintiff must show causation; that the false statement was either the sole cause or a contributing cause of Plaintiff’s act. This last requirement can usually be met with a showing of reliance. That in so acting, Plaintiff relied on Defendant’s false statement.