The appellant lent money to a limited company upon the terms that he should have as collateral security fully paid shares in the company and the company handed to the appellant certificates for 10000 shares of 1 pound each. The certificates stated that he was the registered holder of the shares, and that on each of them before and I don’t have been paid. no money had in fact been paid apologise, which were issued from the company direct to the appellant, but he did not know this and believe the documentation that they were fully paid shares. An order having been made to wind up the company the appellant was placed on the list of contributors.
Held: Since the company had obtained the loan by a representation that the shares were fully paid which the appellant believed and acted upon, the company and the liquidator were estopped from alleging that the shares were not fully paid and the appellant was entitled to have his name removed from the list of contributors.
If a company issues, as security to someone who provides the company with a loan, certificates stating that shares are fully paid up, the liquidator is estopped from denying that the shares are fully paid up when settling a list of contributories
There is no need, and indeed it is wrong, to introduce into the common law notion of estoppel, the equitable doctrine of the bona fide purchaser for value without notice.
Lord Halsbury C said: ‘The ground upon which it is suggested appears to be possibly a question of law and partly a question of fact. As to the question of law I confess for myself I entertain a doubt whether it is ever true in a case where one person has been induced to act by the misrepresentation and another that you can go beyond the fact whether it is so or not. In arriving at a conclusion upon this question of fact all the circumstances must be considered. A statement may be made so preposterous in its nature that nobody could believe but anyone was misled’.
Lord Herschell said: ‘I cannot myself think that, where an unequivocal statement is made by one party to another of a particular fact, the party who made that statement can get rid of the estoppel which arises from another man acting upon it by saying that if the person to whom he made the statement had reflected and thought all about it he would have come to see that it could not be true. Of course, if the person to whom the statement was made did not believe it, and they did not act on the belief induced by it, there is no estoppel. But supposing he did believe it and did act on the belief induced by it then it seems to me you do not get rid of the estoppel by saying ‘If you had thought more about it you would have seen it was not true.’
The very person who makes the statement of that sort has put the other party off making further inquiry. He had produced on his mind and impression as a result of which further inquiry is thought to be unnecessary or useless. Therefore, I confess I do not think that it is legitimate to speculate what is the conclusion at which a man would have arrived if he had put together – pieced together – all the considerations that might have occurred to a reflective mind cogitating on the whole subject, and then to say that because he would have come to the conclusion that the statement made to him could not have been true, he is not entitled to act upon it as if it had been true, when in point of fact he did not enter into those considerations, but did believe it and did act upon it.’
Lord Herschell, Lord Halsbury C
 AC 16, (1897) 66 LJ Ch 253, (1897) LT 205, (1897) 45 WR 449, (1897) 13 TLR 240, (1897) 4 Mans 156
England and Wales
Appeal from – Veuve Monnier et ses Fils, Limited, In re; Ex parte Bloomenthal CA 9-Jun-1896
B lent to a limited company 1000 pounds on its promissory note on the terms that the company should give him collateral security on 10,000 fully paid up 1 pound preference shares, and that if the company should wish to pay off any part of the amount . .
Cited – Cadbury Schweppes Plc and Another v Halifax Share Dealing Ltd and Another ChD 23-May-2006
Fraudsters had successfully contrived to sell shares of others, by re-registering the shares to new addresses and requesting new certificates. The question was which of the company, the company registrars and the stockbrokers should bear the loss. . .
Lists of cited by and citing cases may be incomplete.
Updated: 27 September 2021; Ref: scu.242176