Held ( aff. judgment of the First Division of Court of Session) that a man induced by the fraudulent misrepresentation of agents of a company to take shares in the company, cannot, after he discovers the fraud, elect to retain the shares and to sue the company for the fraud.
A party bought stock in a bank of unlimited liability from its manager and directors. Some two years afterwards the bank failed, and calls were made upon him in respect of the stock which he had purchased. A month after the liquidation commenced he raised an action of damages against the bank on the allegation that he had been induced to purchase the stock by the fraudulent misrepresentations of the manager and directors. The action concluded for payment of the original price of the stock, damages for the loss suffered by the payment of the first call, and for payment of a sum of money to meet future calls. With a view to obtain this he asked either for a pari passu ranking with the creditors of the company, or for relief (after the creditors had been paid) out of the surplus assets of the company or out of the private estates of those partners of the company who might then be solvent. Held ( aff. Court of Session) that as the only remedy which would have been open to the pursuer if the bank had still been carrying on business would have been an action for rescission involving restitutio in integrum, and as that remedy was now impossible owing to the insolvency of the bank, the pursuer’s claim resolved into a demand, not against the incorporated company, but against the individual corporators, who were asked to relieve him of his liabilities after the ordinary creditors had been satisfied, and that as such it could not be maintained.
Judges:
Lord Chancellor (Cairns), Lord Hatherley, Lord Selborne, and Lord Blackburn
Citations:
[1880] UKHL 510, 17 SLR 510
Links:
Jurisdiction:
England and Wales
Torts – Other
Updated: 14 June 2022; Ref: scu.635630