A STARTLING DOCTRINE

New Zealand Times, Volume XLIX, Issue 11302, 30 August 1922, Page 10

A STARTLING DOCTRINE

SUPREME COURT CASE ACTION FOR £3OO FOR ALLEGED MISREPRESENTATION. THE JUDGE’S COMMENTS. Fraudulent misrepresentation was alleged as the ground of an action heard biT His Honour Mr Justice Salmond in the Supreme Court yesterday. Charles Leopold Diamanti, a retired hotelkeeper, of Wellington (Mr LA. L. Treadwell) proceeded against Horatio de Courcev Martelli, refrigerating engineer, of Wellington, for whom Nr O. C. Mazengarb appeared, lor the sum of £3OO. , Plaintiff alleged that the defendant actino- as the manager of the National Cool "Stores and Ice Company, a private company with a limited capital, had approached him on various occasions between July, 1921, and September of that year, and by “falsely and fraudulently representing that the business of the company was . prosperous and increasing, and that it was intended to increase the capital from £ISOO to £2OOO, induced plaintiff on September sth of last year to buy 300 £1 shares in it.” The company, it was alleged, was not then and never had been prosperous, and was now insolvent, and the plaintiff claimed aa damages the sum of £3OO. FOR THE DEFENCE.

For the defence it was admitted that Martelli acted as the manager of the company; but the other allegations of the plaintiff met with a complete denial. If defendant had made any representations that the of the company was prosperous and increasing (and this tie denied), it was not in writing ns was required by the Statute of Frauds Amendment Act, and the defendant pleaded that statute as a defence. •

It had been proposed and steps were being taken to increase the capital from £ISOO to £2OOO. The prospects of the company had been freely discused between members of the company and the plaintiff, and if in the course "of these discussions the defendant had expressed any views concerning the future prospects of the company this had been liis honest opinion. Plaintiff was not induced to act by any representation by tlie defendant, but exercised bis own _ judgment, and with a yiew to obtaining employment as a servant of the company elected to pay £3OO into its capital and to take all risks concerning the business. Defendant denied that this sum of £3OO had been received personally by him. It was paid into tine company’s banking acoount, and if no valid increase of capital had been made, and no valid allotment of shares to plaintiff had taken place, such were defaults of the company and were not chargeable to the defendant. Since doubts as to the. valid increase in the company’s capital had arisen . plaintiff had been offered 300 shares in the original and more valuable capital of the company. Since March 13th of this year plaintiff had been fully aware of the invalidity and had, by bis conduct, waived any right which He might have had in an action against the defendant. A NONSUIT POINT.

After the court had heard evidence, Air Mazengarb submitted legal authority for his statement of defence, and urged as a nonsuit that there was nothing in writing. His Honour: Might not this in law be a representation made by the company itself, and as such, might not the company be liable? Counsel: I submit, sir, that we are covered by the statute. Hia Honour stated that the matter might he one of contributory negligence. His Honour: Yon say that the directors of a company might take part in a fraud by a oompanv, issuing a fraudulent prospectus and making fraudulent appeals to the public, ana yet might not be liable to* prosecution if there was nothing in writing? Counsel: Yes, sir. “A rather startling doctrine,” commented His Honour.

. “Well, sir, that may be the position to which we ore driven by the Act,” said Mr Mazengarb. His Honour reserved the nonsuit point, and the court adjourned until this morning.