#6900 - Amstrong V. Jackson - Restitution of Unjust Enrichment BCL

Amstrong v. Jackson

Facts

The plaintiff is a medical man without business experience. The defendant is a stockbroker and a member of the London Stock Exchange. Prior to April, 1910, the defendant had acted as stockbroker for the plaintiff and had carried through several transactions for him. On April 12, 1910, the plaintiff by telegram instructed the defendant to buy for him 600 shares in a company known as the Champion Gold Reefs of West Africa, Limited. The capital of the company was 50,000l. in 200,000 shares of 5s. each. On the evening of April 12 the defendant wrote to the plaintiff informing him that his order had been executed, and sent with the letter a contract note in the ordinary form, purporting to show that the 600 shares had been purchased at the price of 21l. per share. The total amount debited against the plaintiff was the sum of 1758l. 16s. This sum included a charge of 15l. for the services of the defendant as broker.

The shares gradually fell. The plaintiff paid the resultant differences. He became anxious. He asked the defendant for his views. The defendant advised him to take up the shares. In pursuance of that advice the plaintiff took a transfer of the shares in December, 1910, and paid the price to the defendant. The plaintiff continued to hold the shares as the duly registered proprietor thereof. The years passed on. In the summer of 1915 the plaintiff heard rumours which awakened his suspicions. His solicitor wrote to the defendant for the name of the jobber from whom he had bought the 600 shares on the plaintiff's behalf.

As a result of these proceedings it has been established that the defendant had never purchased any of the shares for the plaintiff. The contract note of April, 1910, was wholly fictitious. It was a mere sham. The defendant had not carried over any of the shares on behalf of the plaintiff. The contango notes were fictitious. It is equally clear that the shares which were transferred to the plaintiff in December, 1910, were not the shares of a third party, but were the defendant's own shares. The defendant had been a promoter of the Champion Gold Reefs of West Africa. He had received by allotment a large block of shares on the formation of the company, including the shares transferred to the plaintiff in December, 1910.

The plaintiff was deceived throughout. Hence the plaintiff claims (a) that the whole transaction be set aside, or (b) alternatively that the defendant be ordered to pay compensation for breach of duty. It should be added that the value of Champion Gold Reef shares at the date of the writ was about 5s. per share.

Holding

Drop in the value of shares does not prevent restitution

I turn now to the second contention of Mr. Disturnal with respect to the claim for rescission. He argued that no decree should be granted inasmuch as the circumstances had changed through the lapse of time and that the plaintiff could not restore in 1917 that which he had received from the defendant in 1910. The shares in 1910 stood at nearly 3l. for each 5s. share. They are now worth 5s. only, or slightly less, and at such a price they have been standing at and since the issue of the writ. But in my view this second contention fails also, although, of course, it is clear law that restitutio in integrum is essential to a claim for rescission. The plaintiff still holds the shares he bought in 1910. He can hand them back to the defendant. The company is the same as in 1910. Its name only has been changed. The objects of the company have not changed though the assets of the company may have varied. The market valuation of the shares has greatly dropped, but the shares are the same shares.

Distinguishing delay before and after discovery of fraud

In my view the words of Lord Blackburn in Erlanger v. New Sombrero Phosphate Co., quoting Clough v. London and North-Western Ry. Co. 33, have no application to the present case. In the Erlanger Case Lord Blackburn says this:

“‘We think that so long as he has made no election he retains the right to determine it either way; subject to this, that if, in the interval whilst he is deliberating, an innocent third party has acquired an interest in...