CLEMENT V. THE NENTHORN CONSOLIDATED.

Otago Witness, Issue 1903, 24 July 1890, Page 13

CLEMENT V. THE NENTHORN CONSOLIDATED.

Unless we are very much mistaken, the decision of Mr Justice Williams some days ago in the case Clement v. the Nenthorn Consolidated Quartz Mining Company will have a wider influence than that gained by merely Bettling the dispute between the parties. Mr Clement sought to have his name removed from the company's register because he found that a material representation in the advertised prospectus turned out to be untrue, but he lost his case because of his delay in demurring, and in consequence of his continued adherence to the company by paying calls after he had discovered the misrepresentation. The misrepresentation consisted of the omission' of certain very important words— bo important indeed as to have a material influence in inducing the public to purchase shares. The published prospectus stated that the whole of the money, £2000, to be called up on certain shares would be deToted to the exploitation of the company's claims, while the prospectus issued afterwards disclosed an agreement between the company and the promoter to the effect that promotion money to the extent of £375 was to be deducted from the working capital. This is the part of the transaction which is calculated to throw the most 'light upon the methods by which companies are' floated, and which accounts for much of the fervour with which promoters descant upon the merits of proposed investments. In cases of this kind the ordinary process between buyer and seller is reversed. Usually, when a person has anything to sell, if he employs an agent he pays the agent his commission out of the proceeds ; in the case of a mining venture, the buyer purchases at the nominal value, and afterwards pays the" agent his commission or fee besides. In this case, the expense connected with floating the company with a nominal called-up capital of £2000, was as nearly as possible a fifth of the amount, which indicates either that the venture was very diffi- ' cult to work off, or that the promoter was a very talented man. The omission of the very important qualification about promoter's fees in the advertised prospectus may have been accidental, but it certainly requires a large amount of charity to believe so, and if Mr Clement had only taken steps in time ifc is not difficult to suppose from the decision that the court would have promptly relieved him from the obligation into which he had been ensnared. The time-honoured adage that the buyer must beware, does not apply in the case of actual misrepresentation. Judging by the tendency of the proposed " Directors' Liability Act " ; it is rather the seller— of mining shares at all events — who must take care that he makes no representation which he cannot afterwards substantiate, for fear of personal consequences. The effect of the decision in this case will be rather to make the general public more shy of purchasing shares in mining ventures at all, than careful in examining statements. If the goose which lays the golden eggs has not been already killed, the efforts of her • exploiters " have made her discontinue her profitable occupation, and we need not say with" what; advantage. We certainly think that all those who bought shares on the faith of the original representation are entitled to have their money back.