#6898 - Spence V. Crawford - Restitution of Unjust Enrichment BCL

Spence v. Crawford

Facts

My Lords, the appellant is the pursuer in this action, by which he seeks reduction of the contract constituted by the respondent's offer dated 18 August 1931, and the appellant's acceptance thereof, dated 27 August 1931, on the ground that his acceptance was induced by false and fraudulent misrepresentations by the respondent.

The offer and acceptance which constituted the contract under reduction are as follow. First, the offer is in the following terms:

I hereby offer you the sum of 2,250 in full satisfaction of your holding in the Glencairn Metals, Ltd., and of any claims or interest which you may have therein, and that on the following terms and conditions:--

1. That the purchase price shall include 2,925 shares valued at 1,350, in said company, and a loan of 900 granted by you to the company.

Glencairn Metals Ltd, is a private company formed in 1919 with a capital of 6,000 in 1 shares, 5,850 of which shares were issued, and, at the date of the contract in August 1931. The appellant's case is that he was induced to sell his shares and to sever his connection with the company by the respondent's fraudulent misrepresentations. He does not challenge the adequacy of the consideration, but maintains that he would not have parted with his shares or his interest in the company but for these misrepresentations.

In my opinion, that is clearly established, and, if so, there would remain only the question as to whether restitutio in integrum is possible in the circumstances.

Holding

Appellant is entitled to rescind the contract subject restitutio integrum

In my opinion, the inevitable inference from the above facts and circumstances is that the fraud was carried out in the sole interest of the respondent and at his instigation, as well as with his knowledge. I am therefore of opinion, in agreement with Lord Moncrieff and Lord Carmont, that the appellant is entitled to have the contract reduced, provided he is able to effect restitutio in integrum, which will fall to be next considered.

Appellant’s undertaking

On record, the appellant offered repayment of the price of 1,350 which the respondent paid for the shares, with interest at 4 per cent from 27 August 1933, and, if anything further were required to effect restitutio in integrum, he stated that he was prepared to do or pay what was necessary.

Distinction between cases where the claimant is the buyer and claimant is the seller

It is to be noted that the condition of the relief is the restoration of the defender to his pre-contract position, and that no stress is placed on whether the pursuer is so restored. The normal type of case in which the question has arisen is one where the pursuer is purchaser, and seeks to recover the price on restoration of the subject purchased, and the question in issue is whether the pursuer by his treatment of the subject purchased, while in his possession, has so treated it that it is no longer identifiable in any reasonable sense. I should add that the alteration of the subject purchased might also have been caused by circumstances outside the control of the pursuer, such as the conversion of shares into shares of an essentially different character.

Distinction between cases of fraudulent and innocent misrepresentation

Some discussion took place at the hearing of this appeal as to whether the application of the doctrine was to be measured by different standards according as the misrepresentations were fraudulent or not. Lord Lindley, then Lindley MR, undoubtedly took the view that there was a difference, as appears from his opinion in the Lagunas Nitrate Co case, and, as I shall indicate later, I am of opinion that this must be so.

As I have already observed, the doctrine relates to the restoration of the defender to his pre-contract position, and the above statements as to the modifications of the doctrine relate to what the defender is to get. None of these statements deals directly with the case of the vendor seeking relief against the purchaser in regard to the effect on the application of the doctrine of changes in the subject-matter while in the hands of the purchaser, and it is in regard to this question that, in my opinion, there may well be a different conclusion according as the misrepresentations are fraudulent or not.

I may say broadly that, in my opinion, the defender who, as purchaser, has been guilty of fraudulent misrepresentation is not entitled in bar of restitution to found on dealings with the subject purchased, which he has been enabled by his fraud to carry out.

To hold that the...