Australasian Brokerage Limited v Australian and New Zealand Banking Corporation Limited [1934] HCA 34

subscribed or underwritten. During the course of negotiating an between the appellant company and the respondent for the disposal of shares of the latter corporation, its chairman of directors, who had entrusted with the conduct of the negotiations on behalf of the re informed the appellant's chairman of directors that the specified shares had been allotted, and later handed to him a prospectus of th

respondent and other documents in which it was variously stated that H.C. or A. the respondent had proceeded to allotment with the required allotment 1934, figure "over-subscribed," or "exceeded." The agreement was executed. "G~

It subsequently appeared that only 86,000 shares had been subscribed in AvSTRAr~ cash and allotted, that a firm underwriting contract was held by the tee respondent with respect to the balance of the specified number of shares, Lip, and that applications for those shares had not been made. In a common vw

law action for deceit the appellant complained that by the misrepresenta- ete tions of the respondent's chairman of directors, made orally and by way ZpALAND of the documents, it had been induced (a) to enter into the agreement, eee and (b) to carry out its terms, to its prejudice. A verdict in favour of the [irp, respondent was set aside on appeal and a new trial ordered. At the re-trial © - the question whether the respondent was responsible for the statements of its

chairman of directors was left to the jury. 'The direction of the trial Judge on

this point tended to show that it was not so responsible. He refused to direct

the jury that the expression " over-subscribed " could not include " under-

written," and left it to the jury to determine the meaning of the expression.

A verdict for the respondent was given on both counts.

Held that the jury had been misdirected, and (Starke J. dissenting) there should therefore be a new trial on the first count; but that a new trial of the second count should not be ordered, because it alleged no more than that. the appellant had been induced to carry out an existing legal obligation.

Decision of the Supreme Court of New South Wales (Full Court) reversed.

Arpeat from the Supreme Court of New South Wales. In an action brought by Australasian Brokerage Ltd. against _ Australian and New Zealand Banking Corporation Ltd. the plaintiff 'declared upon three counts for breach of warranty and two counts in deceit. The jury found a verdict for the plaintiff in the sum of £2,500 upon the warranty counts, and a verdict for the defendant upon the two counts in deceit. In one of the counts in deceit the plaintiff alleged that the defendant " falsely and fraudulently repre- sented to the plaintiff that 400,000 shares in the defendant company had been duly subscribed and allotted, which the defendant knew to be untrue and thereby induced the plaintiff to enter into an agreement, dated 19th June 1930, between the plaintiff, the defen- dant and Dominion Brokers Ltd., whereby the plaintiff suffered damage." In the other count in deceit the plaintiff alleged the same fraudulent representations on the part of the defendant inducing

H.C. or A. representations were made orally by one A. C. Willis, a director of by the defendant company, at various conversations with one A, @,

Avsrrat- de L, Arnold, chairman of directors of the plaintiff company and Broxenice also its solicitor, between 7th March and 19th June 1930; and those Ip. under the second count alleged in addition thereto, representations

ee crraaad by the defendant in writing by various drafts, printers' proofs and

Zeacaxd final prints of a prospectus issued by the defendant, under da Fo Terai 30th June 1930, between 19th June and 30th September 1930, lm. 'The verdict upon the first count in deceit was returned by direction _ of the trial Judge, and upon the other after consideration by the jury. Upon appeal, the Full Court of the Supreme Court entered a verdict for the defendant upon all the counts. From this decision the plaintiff appealed to the High Court, which ordered a new trial of the counts in deceit. The re-trial resulted in a verdict for the defendant, and the plaintiff applied to the Full Court of the Supreme Court for a new trial. The application was based on the ground, amor others, that the trial Judge had not correctly directed the jury wi regard to the authority of Willis to make the representations i question on behalf of the defendant or with regard to the truth or - otherwise of the representations. The direction on the question of the authority of Willis sufficiently appears in the judgments here- under. As to the representations, it appeared from the evidence - that the defendant's first prospectus contained a statement that "the corporation will not proceed to allotment until 400,000 shares have been subscribed or underwritten"; in a subsequent draft prospectus, which was handed by Willis to Arnold, it was - stated that the defendant had proceeded to allotment "with the - required allotment figure of 400,000 shares over-subscribed by _ 32,000" and "the requirements . . . for such allotment were over-subscribed," and the printed prospectus contained the same statement with the exception that, for the phrase " over- subscribed by 32,000," the word " exceeded " was substituted. It also appeared that only 86,000 shares had been subscribed in cas and allotted, but the defendant had an underwriting contract covering the balance of the 400,000 shares, which had not been applied for. In the course of his summing up, the trial Tudge, 2 referring to the first prospectus, directed the jury that " you have ae

u have to consider the 400,000 as relating to 'required' that is

'isthe 400,000 to be limited to subscribers only? . . . Fwill not rule to you that 'over-subscribed' cannot refer to underwriting but the question I am leaving to you is whether it can be trued in conjunction with the underwriting. That is a matter yr you under the circumstances." The Full Court refused to grant the application for a new trial.

From that decision the plaintiff now 'appealed to the High Court. Other material facts appear in the judgments hereunder.

Windeyer K.C. (with him Wesche), for the appellant. The lan- e of the agreement entered into between the appellant and the jondent on 19th June 1930 shows an implied promise that the itement in the prospectus shall be accurate. The representation at 400,000 shares had been subscribed and allotted was false. word "subscribed" as used implies the payment of money. y that representation the appellant was induced to enter into the it and to carry out its terms. The underwriting agree- it was not such as to enable the respondent to proceed to allot- . The representations made by Willis came within the scope

d the jury on this point. The effect of the summing up was it the jury was allowed to consider whether Willis had authority make false statements. There was not any justification for the itement that the prescribed number of shares had been over-

ed. Had that number been over-subscribed there would have been any need for underwriting. "Subscribed" has a

OF AUSTRALIA. 433 to put a meaning on it, on all the facts before you." His Honor H- ©. or A.

• also said that he left it to the jury to say whether the wordsin the 2% later documents referring to the "'required" number of shares Avsrrat- "refer back to the statement made in the first prospectus that the enced equired amount is made up of 400,000 shares underwritten or subscribed, or are they straight out statements that this company Saas d 400,000 shares or more subscribed to it. . . . The main Zeananp BANKING seems to be on that . . . point, whether Corporation Lrp,

AustTraL- ASIAN BrokERAGE Lrp. vw. AUSTRALIAN anp New ZBALAND Bankine CoRPORATION Lev.

meaning different from that of "underwritten." The trial Judge was in error in leaving to the jury the question whether underwriting could be called in aid. The jury was not entitled to accept such underwriting as was proved as answering the question whether there had been a misrepresentation because the words used were not capable of the meaning that underwriting was an alternative to

" subscribe." The words used are clear and unambiguous. There - was an intention on the part of the respondent to deceive. Upon the important question of misrepresentation the trial Judge omitted - to give a ruling and the Full Court gave an erroneous ruling. In_ the circumstances of the case the Court should, notwithstanding that the matter has been litigated twice previously, grant a new trial. On the previous occasions the jurors were not only misdirected, but also were not directed on important aspects of the matter. Two

features in particular were that (a) an unambiguous statement was:

ings, and (5) the trial Judge suggested, as his opinion, that the words were capable of, and bore, a meaning of which they were not capable. The jury was misled ; therefore the appellant is entitled to a new trial as of right and not as a matter of discretion. There is no authority which supports the Full Court's view that an action in - deceit necessarily fails where the plaintiff alleges that, through the defendant's fraud, he (the plaintiff) was induced to perform, or to continue to perform, an existing obligation. : [Evarr J. The American writer, 7'. A. Street, says that "in the - eye of the law a man is not injured by being beguiled into the doing of a thing which he is already legally bound to do. Where this - happens the deceitful artifice is not a ground even for the avoidance of a contract, and, a fortiori, it does not afford a ground for the action of deceit"? (Foundations of Legal Liability (1906), vol. 1. p. 416).

Curtis K.C. (with him Badham), for the respondent. The Cou will not order a third trial of the matter unless a miscarriage of

the respondent until the first hearing, long after litigation commenced. According to the particulars the oral representations

al eged were made anterior to the execution of the agreement ; 'therefore, at most, they can be used only as an inducement to enter into the agreement, not as an inducement to carry out its terms. e words used by Willis do not amount to a misrepresentation. Even if they do they do not amount to more than the representation

in the first prospectus. The words " subscribed or underwritten " :

in the prospectus should be given their ordinary meaning, that is,

subscribed or covered by a valid underwriting agreement. There is no allegation that a representation was made that the prescribed ber was exceeded. The whole of the written documents relied on as evidence of fraud inducing continuance of the contract was e the jury in the first trial and they found no fraud, and that ng was also given by the jury in the second trial, who had before em in addition to the documents, Arnold's statement. Although question should not have been left to the juries their findings on this point, in the circumstances, afford strong reasons why a third should not be granted. The juries were properly directed on e question whether the statements made by Willis came within scope of his authority. He was not, whether as a director or se, expressly or impliedly authorized to make misstatements regard to the prospectus. On the second count the jury must found that the documents did not support a charge of fraud. aoe documents were not documents in respect of which the ques- a of authority arose.

_ Windeyer K.C., in reply. The gist of the matter is: What is it by " over-subscribed" 2? That word excludes underwriting. e words used are not ambiguous; therefore the direction of the Judge to the contrary was erroneous. The finding as to the econd count was not necessarily a finding as to the first count. The question of fraudulent intention does not depend upon what

se words. In view of the prospectus the words used are not ble of an innocent interpretation. The jury was misdirected this point. Even though the representations by which the

lant was induced to enter into and to carry out the terms of

AUSTRAL- ASIAN BrokERAGE Lrp. % AUSTRALIAN anp New ZeALAND BANKING CORPORATION Lrp.

v% AUSTRALIAN anp New ZEALAND BANKING Corporation Lrp.

the agreement were partly true and partly false it is entitled to succeed (Cults v. Buckley (1); Edgington v. Fitzmaurice (2)). The

sentations and is, therefore, entitled to damages (Spencer Bower a1 Actionable Misrepresentation, 2nd ed. (1927), p. 152).

Curtis K.C., by leave, referred to Henderson vy. Lacon (3) a Arnison v. Smith (4).

Srarke J. This is an appeal from a judgment of the Supreme Court of New South Wales dismissing a motion on the part of the appellant for a new trial of an action brought by it against he respondent. The action has been twice tried with a jury. At the original hearing, the plaintifi - the appellant - declared upon fi counts, but judgment has been entered in favour of the preset respondent upon all but two of these counts, the fourth and fifth. The fourth count alleged certain fraudulent representa' on the part of the respondent inducing an agreement dated 19 June 1930, between the appellant, the respondent, and Dominion Brokers Ltd., whereby the appellant suffered damage. The fifth count alleged the same fraudulent representations on the part of the respondent inducing the appellant to carry out the terms of the agreement already mentioned. Particulars under the fourth count alleged that the representations were made orally by one A. Willis at various conversations with one A. G. D. Arnold betwe 7th March and 19th June 1930; and those under the fifth co alleged that the representations were made orally by Willis betw the same dates, and also by the respondent in various drafts, print proofs and final prints, and in a prospectus issued by the responde between 19th June and 30th September 1930. Willis was a direct of the respondent company, and Arnold was the chairman of directors _ of the appellant company and also its solicitor. It was admitted

(1) (1933) 49 C.L.R. 189. (3) (1867) LR. 5 Eq: 249. (2) (1885) 29 Ch. D. 459. (4) (1889) 41 Ch, D. 348.

'the first trial that the statements contained in a prospectus of 30th H.C. or A.

June 1930, whatever they might mean, were made by Willis to aes

Arnold before the agreement of 19th June 1930, but not that they Avsrrat- made on the authority of the respondent company. Evidence scacoecicanet

tendered of oral representations made by Willis to Arnold

between 7th March and 19th June 1930, but was rejected. The AvsTrauiay

learned trial Judge withdrew the fourth count from the jury. A Zeatanp 4 ict was found for the 'defendant - the respondent - on the fifth Goes count, but otherwise for the plaintifi - the appellant. The Supreme 1? Court of New South Wales, on a motion for a new trial, directed that "tate J- ayerdict be entered for the defendant, the respondent. The reasons

given by the learned Judges were thus expressed: " It was argued

cribed and allotted in the ordinary way, and that as this was ue, a term of the contract was broken and a false representation . On the other hand, it was contended that these words had o be read in conjunction with the statement in the New Zealand pectus, a reliance being placed upon the words 'allotted or ritten,' and in view of the evidence it was clear that there had been no breach of agreement or misrepresentation. We are of opinion that the contention of the defendant is correct. The state-

pectus we have to consider what the required allotment figure 400,000 shares means. . . . The 'required allotment figure' efers to the statement made in the first prospectus ' 400,000 shares ubscribed or underwritten.' That is, that in considering the state- in the second prospectus, thé word underwritten must be 1 If that be so, it is clear from the evidence that more than 400,000 shares had been allotted and underwritten before the agreement of 19th June was entered into between the plaintiff

dthe defendant. If that be so, there was no misstatement before

v AUSTRALIAN anp New ZEALAND BankIne Corporation Lrp.

Mr. Arnold upon which an action for breach of contract or misrepre- sentation could be founded." The learned Judges were inclined to think that the fourth count should have been left to the jury, as the fifth count was left to them ; but that as the same representations, though oral, were relied upon as to the fourth count as in the case of the fifth count, the same construction must be put upon them and the same result reached. | On a further appeal to this Court, however, a new trial was ordered on the fourth and fifth counts. Unfortunately, reasons were not given for this decision. It was suggested rather than argued before this Court that the fifth count disclosed no cause of action, but it was allowed to go down with the fourth count for a new trial, leavi : the question of law open for further consideration. But it is fairly clear, I think, that this Court was of opinion that there was evidences fit for submission to a jury that statements of the nature alleged in the fourth and fifth counts made by Willis to Arnold in the co of the negotiation of the agreement of 19th June 1930 were within the scope of his authority as a director or agent of the respondent. that the learned trial Judge was in error in rejecting such statements and that the learned Judges of the Supreme Court were in error in confining themselves to the legal construction of a somewhat con- fused document. The fact that Willis negotiated the agreement of _ 19th June 1930 with Arnold, and that the respondent accepted and - acted upon it, is some evidence that the scope of his authority extended to acts and statements calculated to bring about that agreement. The statements in the 1930 prospectus, taken in con- nection with the earlier prospectus of 1929, and in the context in_ which they are found, are capable of more than one meaning. And the questions were - in what sense a reasonable business man might understand those statements; in what sense Arnold understo and acted upon the statements ; whether, so understood, they were true or false ; and whether the respondent intended the statements - in the sense so understood and knew that they were false (Smith v. Chadwick (1); Angus v. Clifford (2)). But it is unnecessary pursue this topic further. A new trial was had on the fourth a fifth counts, and the jury returned a verdict for the respondent.

'1) (1884) 9 App. Cas. 187, at p. 201. (2) (1891) 2 Ch, 449, at p. 472.

appellant again moved the Supreme Court for a new trial, but the H.C. or A. motion was dismissed. And an appeal is now brought to this Court. ue, 'The cause of action alleged in the fifth count is that the appellant Avsrrat- fered damage in carrying out and performing an existing legal Baden obligation by acting on the false statement of the respondent. But Cea

na common law action for deceit damage is the gist of the action. wo anp New

An allegation that a person carried out and performed an existing Zeatanp gal obligation owing to fraudulent statements discloses no damage. Goee verdict is therefore rightly entered for the respondent on this ee pine! Starke J. cause of action alleged in the fourth count is that the plaintiff induced to enter into an agreement on the false representations the respondent, whereby it suffered damage. Interviews took between Arnold and Willis on 11th March and 5th June 1930. spectus of 1929 was referred to in which appeared the state- "The corporation will not proceed to allotment until 400,000 have been subscribed or underwritten " ; and Arnold deposed following conversation : - nold: You have got your 400,000 shares in New Zealand ? jillis: Yes, mold: I want a statement that the 400,000 shares were allotted. Willis: All right." The statement was required, I gather, in a prospectus that was it to be issued. Willis denied these statements. It was proved, ink, that 400,000 shares were not subscribed in cash, nor allotted, it is open to question whether they were, strictly speaking, erwritten. Agreements to underwrite were proved, but applica- ns for shares in accordance with such agreements were not made. he jury found, as already stated, for the defendant, and the Supreme refused to disturb the verdict. The main ground of objection ras that the learned trial Judge had not properly directed the jury n the subject of the liability of the defendant respondent in respect statements made by Willis inducing the agreement of 19th 1930. The charge was far from satisfactory. I transcribe he essential parts of it from the transcript : - "T leave it to you whether you thought Mr. Willis had authority e such representations to bind the company. I am told by

v AUSTRALIAN np New ZEALAND Banging Corporation Lp.

the High Court that the evidence ought to be admitted. Thi conversations are between Mr. Arnold, who represents the plaint and Mr. Willis, who was a director of the defendant company, a was one of the directors who signed the agreement, and was a according to Mr. Arnold's evidence, the director whom he saw through in regard to the matter. Mr. Curtis puts it to you that might be all that, that he might have a right to do all these thin but as a director he has no right to make false representations to bind his company . . . Mr. Willis is a director who, according to Mr. Arnold, says certain things which are not true, and Mr. Cu says ' If he had no authority to do that from the company, he bind the company.' It will be for you to say whether he had authority. Mr. Windeyer says that these acts which I have put before you are sufficient to show that he had authority to bind company. If you find that Mr. Willis acting in that way hi authority to bind the company, then you will have to consider the representations as being the company's representations." At the conclusion of the charge, counsel for the appellant reques that the learned Judge direct the jury that Mr. Willis had authori to do all things incidental to the business he was admittedly ca on for the bank, but the Judge refused to do so. Counsel for respondent said that he did not object to a direction that the j should consider "all things necessarily incidental to the business Later the jury was thus addressed : - The Judge: Of course, in considering the position of Mr. Wil you have to remember that he was the managing director of company, and that he would have authority to do all such things a a managing director could do. ; Mr. Windeyer : He was chairman of directors. The Judge: Yes, that is so. Mr. Windeyer : And for a long time he was sole representative in Sydney. Mr. Curtis : I agree " all things necessarily incidental to his dutit as chairman of directors." i Mr. Windeyer: That is not what I am asking for, that he had authority to do all things necessarily incidental to the business was admittedly carrying on for the bank.

The Judge: Mr. Windeyer asks me to tell you that, and I leave H.C. or A. to you, and I still leave the same question to you, whether he te

ad all that authority to make statements which were untrue. AustRat- ASIAN

Mr. Windeyer: I suggest formally that that is a misdirection. Broxenice

is never part of a person's authority to commit a tort; it is only authority to do something which may become a tort. The Judge: I will leave it as it stands.

a - + rol 5 Bayxixe An innocent principal is, however, civilly responsible for the Corporation wud of his agent acting in the course of his employment and within 1": apparent scope of his authority, to the same extent as ifit were "tre J.

own fraud. The scope of a person's employment depends upon business he is employed to transact and the nature of the transac- entered upon. The position of Willis was such that he was ized to negotiate the agreement made with Arnold, and it is

ocuring that agreement were not within the apparent scope of authority. The jury should have been so directed, and the e was therefore faulty.

h covered statements in a prospectus of June 1930 much er than those to which Arnold deposed. It is true no doubt

it the learned Judge said that on each count the jury must find that the representation was made, that it was made by a person ng authority to make it, that it was false, and that it was false othe knowledge of Willis. So far as the fifth count was based upon tatements made by Willis, the charge is open to the same objection is the fourth count, but the Judge's remarks could not well have understood as applying to statements in a prospectus issued by company itself, and much stronger than those made orally to old. Further, when the whole question of Willis' authority was as a fact to a jury of business men, it may well be doubted ther the insufficiency of the charge led to any real misunder- of the position or any miscarriage of justice. It is le, but unlikely, I think, that the jury found that Willis'

AUSTRAL- ASTAN BrokERaGe Lrp. v% AUSTRALIAN anp New ZEALAND

statements were false and fraudulent and induced the agreement 0 19th June 1930, and yet that he had no authority to make them A third trial in a case of this description would be a grievous bur to the litigants, and in all the circumstances it should he refus

Drxon, Evarr anp McTiernan JJ. Upon the first trial of action out of which this appeal arises the jury found a verdict for the plaintiff for £2,500 upon three counts for breach of warra and a verdict for the defendant upon two counts in deceit. verdict upon one of the two counts in deceit was returned b direction of the Judge, and, upon the other, after consideration b the jury. Upon appeal, the Supreme Court entered a verdict defendant upon all the counts. From the order of the Supreme Co the plaintiff appealed to this Court, which considered that no w ranty was disclosed by the evidence but that a miscarriage hi occurred in relation to the plaintiff's cause of action in fraud, be of the erroneous rejection of evidence. A new trial was, th ordered of the counts in deceit. The re-trial resulted in a verdiet for the defendant. The plaintiff applied for a new trial, which ¥ refused by the Supreme Court. From that refusal the plaintiff n appeals to this Court. 4

To induce a Court to order a third trial, the party against whom the verdict has passed must establish that the second trial took course clearly prejudicial to him and so erroneous that the verdict cannot justly be allowed to stand. We are unable to escape | he conclusion that the plaintiff has succeeded in discharging this b The reasons for this conclusion cannot be made intelligible with some statement of the transaction out of which the action arises.

The defendant is a company which was promoted in New Ze: at the end of 1928. According to a prospectus dated Ist July primarily the aim of the company was " to transact general ba business including current and fixed deposits, bills of exch letters of credit, drafts, etc., etc.; to endeavour by the pur of wp-to-date methods and ideas in banking to bring the bank in close and friendly touch with all classes of business, and to extend

h banking and credit facilities as will be commensurate with ety and adequate remuneration to the shareholders."

_ Before engaging in banking, however, the company turned its attention to the disposal of its shares, two millions of which, of a face value of £1, it offered in New Zealand and Australia. To this end it made an agreement, dated 5th June, with a New Zealand ompany called "' Dominion Brokers Ltd.," which undertook to use

dant company and to maintain at its own expense a competent reliable staff for that purpose. The agreement, which conferred n the broking company the exclusive right to sell the shares, and d its remuneration at five per cent on the nominal amount of all allotted during its currency, contained the following pro-

• ' The broker shall not later than the 31st day of December, ), enter into a firm underwriting contract with the bank whereby : broker undertakes by that date to subscribe or to procure sub- ions by responsible persons firms or companies for 400,000 sin the bank at par. The broker shall also not later than the h day of September 1930, enter into a further firm underwriting with the bank whereby the broker undertakes by that date o subscribe or to procure subscriptions by responsible persons firms or companies for an additional 350,000 shares in the bank at par.

cause to be paid to the bank by the respective dates aforesaid the sum of five shillings per share, the balance of 15s. per share being callable by the bank by calls not exceeding 2s. 6d. per share in every months thereafter. The bank shall proceed to allotment when not before shares to the nominal value of four hundred thousand s (£400,000) have been sold or underwritten in accordance the terms hereof but this clause shall not debar the bank from ing the shares subscribed for by the signatories to its memor- n of association." This agreement was annexed to the ectus, the body of which stated that the company would not to allotment until 400,000 shares had been subscribed or itten. It stated also that a sum of five shillings per share - lication and allotment money - was payable on application.

AUSTRAL- ASIAN BROKERAGE Lr. v AUSTRALIAN anp New ZEALAND Bankina

its best endeavours to sell or procure subscriptions for shares in the corporation

ww AUSTRAL- ASIAN BrokeraGe Lyrp. AUSTRALIAN anp New ZEALAND BanKING CORPORATION Lrp.

According to the evidence, on 22nd July 1929 Dominion Brokers Ltd. executed in favour of the defendant company another document, the authenticity of which, however, is not admitted. By this docu- ment Dominion Brokers Ltd., according to and under the terms of the agreement of 5th June 1929, underwrote and contracted to apply for 400,000 shares in the defendant company, with the condition that there should be deducted from that number all shares subscribed for by other persons by 31st December 1929.

On 6th January 1930, the defendant company's directors resolved that, the 400,000 shares provided by the prospectus as the minimum - number to be subscribed or underwritten before allotment having been subscribed and duly underwritten, shares amounting to 86,000 be allotted to various persons specified. The minute of this resolu- tion gave a list or particulars of underwriting contracts for 275,000 shares. These appear to have been sub-underwriting agreements.

According to the prospectus of Ist July 1929, the company had a registered office in Sydney, a firm of accountants acted as its secre- taries in Sydney, and one of its directors, A. C. Willis, resided in Sydney. In fact, a board of directors had been established in Sydney, and on 5th April 1929 it formally appointed Willis a director. He became chairman. The company does not appear to have had any business to transact in Sydney until negotiations were opened in March 1930 with the plaintiff company to undertake the disposal of its shares in Australia. But there is evidence from which it might be inferred that until 19th June 1930 when, as a result of those negotiations, an agreement was executed, and when also an indi- - vidual was appointed as secretary, the defendant company was represented in Australia only by Willis. He conducted all the negotiations with the plaintiff company and with Dominion Brokers Ltd. which led to the agreement. , :

The plaintiff company, which appears to have been formed in - New South Wales in September 1929 as an underwriting and share- selling company, had for its leading director a solicitor named Arnold. He had known Willis before he was connected with such enterprises as that of the defendant company. On 8th March 1930, Amold casually met Willis, who appears to have told him of the - proposal to sell that company's shares in Australia. As a result

nold had an interview with Willis on 11th March 1930. The account given by Arnold of what took place was not contradicted. It is as follows : - "I said 'The company I represent is the Aus- n Brokerage Limited. We have been going about six months and we have done a good deal of business. I am the chairman of

nthal.' Mr. Willis said ' The selling of the shares has not been

. He then handed me the New Zealand prospectus and I saw copy of the printed agreement. I did not read the whole of it, but aw the names of the Dominion Brokers there. I also looked at the page relating to the allotment of shares. I said to Mr. Willis You have got your 400,000 shares in New Zealand.' He said ' Yes, ninion Brokers had a representative in Sydney named Mr. '" He added that what he said about the 400,000 shares to the prospectus. After the interview, Arnold says that through the prospectus and the agreement annexed to it. in saw Willis on 3rd June for the purpose of discussing what defendant company's New South Wales prospectus would

in. After dealing with some other matters, Arnold says that id: " And I want a statement that 400,000 shares were allotted," to which Willis replied: " All right."

_ The first of the plaintifi's counts in deceit is based upon these

fraudulently represented to the plaintiff company that 400,000 s of the defendant company had been duly subscribed and

of this count, the purpose of his enquiry may have been

atisfy himself that no difficulty had been experienced by Dominion 5 vou. po 29

tors and there are two other directors, Mr. Rolls and Mr. Austmatas

handled by the pais it is in the hands of a aay called Corrorattox

H.C. or A. Brokers Ltd. in New Zealand in disposing of 400,000 shares to the ise public, or that the defendant company had obtained application and Avsrrat- allotment moneys in respect of that number of shares, or that in ieee undertaking the disposal of shares in Australia the plaintiff company

Lrp. could truthfully represent that 400,000 shares had been taken up

Avstmarnan in New Zealand. In fact only 86,000 shares had been allotted, but Zeavann a firm underwriting agreement, unless the document be ante-dated Aaa had been made by Dominion Brokers Ltd. so as to satisfy the te1 ip. of the agreement of 5th June 1929 and the statement in the prospectus Pixon J. that the defendant company would not proceed to allotment unti MeTiernan J- 49 990 shares have been subscribed or underwritten.

On behalf of the defendant company, it is said that Arnold, having read the prospectus, must have understood Willis's statement to mean that no more than that 400,000 shares had either been allo or underwritten firm. But the firm underwriting agreement requir by the agreement of 5th June 1929 is one by which the brokers undertook that, before 31st December 1929, they would subscribe or procure subscriptions for the full amount, and Arnold swore that understood that on 6th January 1930 more than 400,000 shares h

, been allotted. The questions what meaning was intended to and was actually conveyed to him were, of course, for the jury. The question of inducement was also one for that tribunal. Upon that question, the purpose for which he required the information was important, because the respect in which the representation departed from the actual facts might be less material if he had in view one suggested purpose rather than another or others. But, in any view, the jury was entitled to find that the representation operated as an inducement to Arnold's company to enter into the agreement. The agreement is dated 19th June 1930. By its provisions the plaintifi company was appointed sole broker of the defendant com- pany for the disposal of two millions of its shares at par at a com- 5 mission of seven and one-half per cent. The plaintiff company undertook to use its best endeavours to sell or procure subscriptions of the shares and to maintain at its own expense a competent stafi. It agreed to sell the shares only on the terms, conditions, facts and figures contained in prospectuses, application forms and literature

supplied by the defendant company. Within a week of the agree- 'ment a draft prospectus was, Arnold says, given to him. It con- the following paragraph : - ' Allotment - The corporation proceeded to allotment on the 6th January 1930, with the required allotment figure of 400,000 shares over-subscribed by 32,000.

"Approval of New Zealand Public - The response of the business and professional communities in New Zealand to the issue of the

the end of 1929 is crystallised in the fact that when the corporation it to allotment in New Zealand on 6th January 1930, the require- ments at that time for such allotment were over-subscribed. Apart from the actual financial outcome of the share issue in question, it is important to bear in mind the significance of the New Zealand ittitude towards the new bank. The economic status and financial soundness of the Dominion and her standing in the international money market makes her national approval of the present enterprise do oubly assuring and important." 8th July 1930, Willis handed to Arnold another draft pros- containing the same passage. The printed prospectus was sued in September, although dated 30th June 1930. Instead of he words " over-subscribed by 32,000," it substituted simply the "exceeded." Otherwise the passage stood unaltered. Even hout the statement thus excluded that the excess over the required otment was 32,000 shares, this paragraph of the prospectus _ appears to us to mean that over 400,000 shares have been actually allotted as a result of applications from the commercial and investing community in New Zealand. Its terms are not consistent with the greater part of the 400,000 shares remaining upon the hands of the erwriters. It conveys to the reader, as it was evidently intended o do, that applications had been received for and allotments made of "more than 400,000 shares. A critical examination of the precise ons chosen shows that it is not said that 400,000 shares have allotted but that "the required allotment of 400,000 shares" "exceeded " and that "the requirements . . . for such otment were over-subscribed." But even to one who had studied e New Zealand prospectus of Ist July 1929, this peculiarity of ession, although doubtless designed, would not control the

es in the Australian and New Zealand Banking Corporation Ltd. Corvoration

AUsTRAL- ASIAN 'BROKERAGE Lro. 0. "AUSTRALIAN anp New ZEALAND Banking CorPoRATION Lrp.

meaning which the context almost demands. It is true that the New Zealand prospectus expressed the requirement by stating that the company would not proceed to allotment until 400,000 had been subscribed or underwritten. But the underwriting agreement annexed thereto provides for a firm underwriting agreement by which _ the broker undertakes by 31st December 1929 to subscribe or procure subscriptions for the 400,000 shares. A statement that, on 6th January 1930, the required allotment figure was over-subserib when read in reference to this document would mean that the com- pany allotted its shares with more than 400,000 shares subscribed.

The second of the plaintiff company's counts in deceit is based upon the passage in the Australian prospectus and the drafts of i The count states the agreement and alleges that thereafter the defendant company falsely and fraudulently represented to th plaintiff company that 400,000 shares of the defendant company had been duly subscribed and allotted, whereas such shares had n been so subscribed and allotted as the defendant company we knew, and the defendant company by the representation had induces the plaintiff company to carry out the terms of the agreement and to incur expense in and about its performance. The difficulty in this count lies in the inducement and damage alleged. The count is so framed as to state an agreement prima facie valid and enforceable and without alleging matter showing it to be invalid, unenforceable or discharged, goes on to allege that the plaintiff company was - induced to perform the agreement, a thing it appears on the aver- ments contained in the count to be legally compellable to do, and that in performing the agreement it incurred expenses and thus lost sums of money. "In the eye of the law a man is not injured by being beguiled into the doing of a thing which he is already legally bound to do. Where this happens the deceitful artifice is not a ground even for the avoidance of a contract, and, a fortior', it does not afford a ground for an action of deceit " (7. A. Street's Foundations of - Legal Liability, (1906), vol. 1. p. 416). For this reason the count is - bad. Upon the issue of fact that it raised, the real questions would - appear to be whether Arnold believed, on reading the prospectus and the drafts, that 400,000 shares had been allotted and whether -

he acted upon that belief. The meaning of the prospectus is clear enough, but it does not follow that it misled Arnold. The defendant company did embark upon the performance of the agreement. A general manager was appointed and an organization was set up for

• disposing of the shares. In the advertisements employed much use was made of the statement contained in the prospectus. Little success attended the plaintiff company's efforts. After expressions

y the defendant company, and, eventually on 19th February 1931, it informed the defendant company that, on a search and inspection of the register, it found the number of shares allotted was under 200,000. Shortly afterwards it notified the defendant company hat it could not continue to sell shares on the faith of a prospectus now knew to contain untrue statements and would hold the dant company responsible for the damage sustained as a conse- Some collateral proposals or requests made by the plaintiff ny provided a basis for an attack upon its sincerity, a matter 'material to this appeal. .

e second trial took place before James J. Almost at the mencement of the evidence, the learned Judge rejected conversa- s with Willis upon the ground that the defendant company would not be bound by his representations. In doing so, he said : "Tt comes back to the one point: has he power to make a repre- sentation which is untrue and which can bind the company?" It was not until the trial had proceeded for some time that the plaintiff 'company's counsel succeeded in getting in the evidence already referred to as supporting the first count in fraud. In his charge to jury, the learned Judge said: "I leave it to you as to whether ou thought Mr. Willis had authority to make such representations bind the company . . . Mr. Curtis puts it to you that he light be all that, that he might have a right to do all these things, but as a director he has no right to make false representations to bind his company. That is how he puts it to you. Mr. Willis is a or who, according to Mr. Arnold, says certain things which are true, and Mr. Curtis says 'If he had no authority to do that rom the company, he cannot bind the company.' . . . Mr.

dissatisfaction, it began to enquire what capital had been issued Conporstiox

v. AUSTRALIAN anp New ZEALAND Bankine CoRPORATION Lrp.

Windeyer"' (the plaintiff company's counsel) " says that these acts which I have put before you are sufficient to show that he has _ authority to bind the company. If you find that Mr. Willis acting in that way had authority to bind the company, then you will have to consider these representations as being the company's repre- sentations." At the end of the charge, Mr. Windeyer, in the presence of the jury, applied for a direction " that Mr. Willis had authority to do all things incidental to the business he was admittedly carrying on for the bank." This was refused. : After another complaint had been dealt with, counsel for the defendant company said he did not object to a direction that thi jury should consider all things necessarily incidental to the business, The learned Judge observed, in effect, that Willis was the chairman of directors and would have authority to do all such things as a chairman of directors could do. Defendant company's counsel: "I agree 'all things necessarily incidental to his duties as chairman directors.'"" Mr. Windeyer: "That is not what I am asking for, that he had authority to do all things necessarily incidental to the business he was admittedly carrying on for the bank." His Honor: "Mr. Windeyer asks me to tell you that and I leave that to you, | and I will leave the same question to you, whether he had all that authority to make statements which were untrue." Mr. Windeyer: "T suggest formally that that is a misdirection." 2 This treatment of the question whether the defendant company was responsible for the representations of Willis was altogether wrong. Nothing could be more calculated to mislead than the question whether Willis had " all that " authority to make statements which were untrue. But that question was formulated by the 4 learned Judge at the beginning of the trial and submitted to the | jury at the end of the trial. If its board of directors confided the - conduct of the negotiations for the agreement to Willis, it followed as a matter of law that the defendant company was responsible _ for the statements which he made to the other party if they concerned the subject matter of the agreement. The scope One the authority is determined by the nature of the duty entrusted -

to the agent (Colonial Mutual Life Assurance Society v. Producers and Citizens Co-operative Assurance Co. of Australia (1); Coroneo y, Kurri Kurri and South Maitland Amusement Co. (2)). Tf e work of negotiating such an agreement was left to Willis, to e statements on relevant matters was clearly within the scope

amount of its issued capital, and give the circumstances in vith the knowledge which he will require in order to consider the

ally made into the question whether to make statements on such s is in the course of authority, the learned Judge supplied an ely erroneous standard. "A person who puts another in his to do a class of acts in his absence, necessarily leaves him to ne, according to the circumstances that arise, when an act that class is to be done, and trusts him for the manner in which

t done; and consequently he is held answerable for the wrong e person so intrusted either in the manner of doing such an et, or in doing such an act under circumstances in which it ought t to have been done; provided that what was done was done, not from any caprice of the servant, but in the course of the employ- at," per Wiles J., Bayley v. Manchester, Sheffield and Lincolnshire

] ilway Co. (3). "It is seldom possible to prove that the fraudulent ict complained of was committed by the express authority of the principal, or that he gave his agent general authority to commit wrongs or frauds. Indeed it may be generally assumed that, in

tile transactions, principals do not authorize their agents to act wrongfully, and consequently that frauds are beyond 'the cope of the agent's authority ' in the narrowest sense of which the ion admits. But so narrow a sense would have the effect of bling principals largely to avail themselves of the frauds of their 8, without suffering losses or incurring liabilities on account them, and would be opposed as much to justice as to authority. A wider construction has been put upon the words. Principals lave been held liable for frauds when it has not been proved that

(1) (1981) 46 C.LR. 41. (2) (1934) 51 C.L.R. 328. (3) (1872) LR. 7 CLP. 415, at p. 420.

h it was allotted, are all involved in supplying the other party Corporation

v AUSTRALIAN anp New ZBALAND Bankrne CoRPORATION Lev.

they authorized the particular fraud complained of or gave a general authority to commit frauds," per Sir Montague E. Smith, speaking for the Privy Council in Mackay v. Commercial Bank of New Bi wick (1).

left to Willis was, upon the evidence, almost unavoidable. But, from first to last, the learned Judge would appear to have encoura; the jury to adopt the view that the defendant company was not responsible for misrepresentations made by Willis. No explanation was given to the jury of the question whether Willis had authorit to make the statements ascribed to him. They were left almost

to guess at what amounted to "authority," at the mode in which it might be derived, and at the considerations which determine its scope. At some stages of the discussion it seems to have been assumed that Willis was acting with the assent of the company in negotiating the arrangement, and yet, although the responsibility for his representations relating to the subject matter would ensue from this fact, the matter was put to the jury as if it was for th to say whether the company had actually authorized him to tell untruths.

An attempt was made to establish that the jury, in findi a verdict for the defendant, must have proceeded upon some other issue. For this purpose the verdict twice found for the defen- dant on the second count was relied upon. Unfortunately, the direction concerning authority extended to the second count. But, further, the finding on the second count may well be attributable to the fact that the learned Judge, not merely left the interpretation of the prospectus to the jury, but led them to suppose that, if the words "the requirements for such allotment were over-subscribed " "refer back to the statement made in the first prospectus that the required amount is made up of 400,000 shares underwritten or subscribed," the prospectus should not be considered untrue. It is, _ of course, quite clear that the reference is to the prescribed number of shares for going to allotment, which is stated in the earlier pros- pectus and the agreement annexed thereto. ,

_ The crucial questions, what Arnold believed and what effect his H.C. or A.

'belief had as an inducement to him, were not clearly and distinctly pe

put to the jury and were not discussed with them by the learned Avsrrat- judge. But the jury was allowed and, indeed, rather encouraged to Regeias give what we consider an untenable meaning to a written document. Ta

Ibis, we think, impossible to extract from the verdict on the second ADEE

ount in deceit any actual finding which would govern the first Bee ount. The learned Judges in the Full Court thought that James J. conten

iad finally left the question of authority to the jury in the manner

nwhich the plaintiff company's counsel asked, and Milner Stephen J. Rixon J- ached importance to a concluding observation of his Honor that aaa e would "leave it as it stands." We cannot agree that counsel

btained what he sought. The qualification destroyed the whole

e, if otherwise it possessed any, of the statement "' Mr. Windeyer

We think a new trial must be had on the first count.

he second count should not go down for further trial. No doubt

it might be amended so as to include allegations of the matters

ined in the first count from which it would appear that the

ent was voidable. But no advantage would be obtained from

course. The representations in the first count would still

in the operative inducement from which the final damage ensued.

Under the first count, the draft and the printed prospectuses are

admissible on the issues of honesty and of inducement. Upon

_ Amold's evidence, the material passage in the prospectus should be

ded as made by the company in order to comply with the request, made on 3rd June. If so, it is evidence of what Willis understood m to mean when he said that he wanted a statement that 400,000 were allotted and of how Willis meant his assent to be under- |. Further, the nature of the statements in the prospectus may e considered upon the question whether what Willis is alleged to we said on 11th March and 3rd June wasinnocent. To the question inducement the prospectuses are relevant as tending to explain why, upon Arnold's story, he continued to rely upon the truth of e representations. They cannot, however, be treated as indepen- it misrepresentations inducing the damage, and to amend the

H.C. or A. count, as suggested, and submit it to the jury would create a d

ee of their being so used. AustRaL- For these reasons we think there should be a new trial upon the ASIAN ; : Broxurace first count in deceit. Lap. v cee Appeal allowed with costs. Order of the Full Court of the AnD NEw ZEALAND Supreme Court discharged. In liew thereof order ate a new trial be had between the parties limited to the fi ae count in deceit being the fourth count in the declarati

as amended under the order of Milner Stephen J. ma on 30th September 1931. Order that the costs of tl appeal to the Full Court of the Supreme Court be pa by the respondent. Order that the costs of the se trial be allowed to the party who is finally successful the action. The reason for not including any order ¢ to the costs of the first trial is because those costs are dealt with by the order of this Court of 1st August 1932.

Solicitors for the appellant, A. G. de L. Arnold & Co. Solicitors for the respondent, Robson & Cowlishaw.