MACAULIFFE Vs. WILSON

JUDGEMENT

(1.) THE appellant in this case became a shareholder in the Himalaya Bank in 1886, several years before the transactions which are the subject of this appeal. The respondent had become a director of the bank in 1885, and continued to be one until it stopped payment on July 8, 1891, and went into liquidation. On May 16, 1893, the appellant brought a suit against the respondent, alleging in his plaint that the respondent strongly advised him to buy shares in the bank as a good investment, and said the bank had a large reserve fund, was on a thoroughly sound footing, and that the directors had declared and paid the usual dividend of 10 per cent.; that the respondent had been for years a director of the bank, and for years, certainly since 1887, had issued or permitted the issue of false half-yearly reports, and had issued false balance-sheets that alleged the existence of a reserve fund of Rs. 70,000 in 1885, and that every half-year the sum of Rs. 5000 had been added to the reserve fund, whereas no reserve fund ever existed; that the balance-sheets purported to show that each half-year a profit of about 19 per cent, on the capital had been made, whereas no profit had been made; that in July, 1890, the respondent issued a balance-sheet, and subsequently issued a directors' report, both of which he knew to be false; that on August 28, 1890, the appellant, on the faith of the false statements of the respondent, made both as a director and as a private individual, was induced to purchase 100 shares, for which he paid Rs. 11,000 on September 10, 1890; that on October 31, 1800, the false report and balance-sheet for the half-year ending June 30, 1890, was laid before the shareholders, and the ad interim dividend of 10 per cent, declared and paid on August 1, 1890, was on that day confirmed, the respondent using the appellant's proxy for that purpose; that, about the end of November, 1890, by reason of the false representations made by the respondent, the appellant was induced to purchase forty-seven more shares, for which he paid Rs. 5170 on or about November 27, 1890. The respondent pleaded that he did not induce the appellant to make the purchases, and did not make any false statement or misrepresentation. The suit was heard by the Subordinate Judge of Dehra-Dun, who, on July 31, 1893, made a decree in favour of the appellant. On appeal to the High Court for the North Western Provinces this decree was reversed and the suit was dismissed. Although the Courts differed in the result, they were agreed as to some of the facts in the case, and as their Lordships will treat concurrent findings of fact as binding upon the parties, it is unnecessary to consider the evidence which is only applicable to them. Both Courts have found that the balance-sheets issued since 1887 were false. But they agree that the respondent is not responsible for them. The High Court says there is not sufficient evidence to show that the balance-sheets issued previous to that of 1890 were false to his knowledge. The Subordinate Judge found expressly that he was not responsible for those balance-sheets. They were prepared by Moss, the manager of the bank, who was absent in Australia when that for the half-year ending on June 30, 1890, was prepared. It was indeed admitted by Mr. Mayne, who appeared for the appellant, that previous to April, 1890, the directors were acting upon representations made to them by Moss. The important part of the case is the issuing the balance-sheet and report for the last half-year, and declaring and paying the dividend on August 1. Both Courts have found that the verbal representations alleged to have been made by the respondent were not proved. The evidence of the appellant of these representations has not been believed by either of the Courts. The case of the appellant must, therefore, rest upon what was done after April, 1890.

(2.) IT appears in the minutes of a meeting of the directors of the bank on July 10, 1890, of which the respondent was chairman, that the directors had gone through the accounts of the bank, and that the state of its affairs had become known to them. In the minutes of a meeting on the 16th of the same month, the respondent being the chairman, it is stated that "the half-yearly balance-sheet ending June 30, 1890, having been duly approved of, it was decided to declare the usual ad interim dividend of 10 per cent, per annum, and that the usual notice be inserted in the newspapers." And both Courts have found that the respondent knew that balance-sheet to be false.

(3.) AS to the forty-seven shares the case is different. The evidence relating to that purchase is mainly documentary. It appears in the appellant's deposition that before September 8, 1890, there had been a negotiation for the purchase of the 100 shares, and on that day the appellant wrote to the respondent: