Briess v Woolley

April 1. Lorp Oaxsry. My Lords, this is an appeal from
a judgment of the Court of Appeal (Lord Goddard C.J., Morris
and Romer L.JJ.), reversing the judgment of Barry J. in an
action for fraud.

The appellants, who were plaintiffs in the action, are four
Czechoslovakians and a company who were engaged in the year
1947 in the food trade. In that year Mr. Fischer, on their behalf,
applied to the defendant Rosher, who was the managing director
of a company called Nutrifood Produets Ld. (hereinafter called
'the company '') with the object of acquiring the shares in the
company, but Rosher at that time, since the company was then
prospering, refused to enter into negotiations. In the year 1948
the company began to lose money and Rosher then approached
Mr. Fischer with a view to his acquiring the shares of the com-
pany on his own behalf and on behalf of his associates, who are
the plaintiffs. It is admitted by the respondents that throughout
these negotiations, which culminated in the sale of all the shares
in the company to the plaintiffs, the defendant Rosher never
disclosed that the accounts of the company, though based upon
figures which were accurate in themselves, were to his knowledge
the result of fraudulent and dishonest trading. The company
was engaged in the manufacture and sale of synthetic cream under
licence from the Ministry of Food, and under this licence the
cream had to be prepared in accordance with a formula which laid
down the percentage of margarine which must be used. The
company, under Rosher's management at all material times,

14 [1897] 1 Ch. 213. 15 [1922] 1 A.C. 240, 247.

A.C. AND PRIVY COUNCIL.

increased the amount of synthetic cream manufactured and sold
by the introduction of water and by the disregard of the formula.

Relying upon the figures in the company's accounts, the
plaintiffs and Rosher had reached a point in the negotiations when
Rosher determined to bring the matter before his fellow directors
and before a general meeting of the company. After this meeting
on October 14, 1948, a minute was drawn up in the following
terms: '"' The chairman reported that the directors had received
""a proposition with regard to the sale of the whole of the com-
""pany's shares. At the present time great difficulties were being
"encountered owing to the restricted supplies of raw material
"with a consequent restriction in output resulting in losses being
""ineurred by the company. There were no prospects in the
""immediate future of the allocation of raw materials being
"increased. The proposition referred to had been received from
""Kconomic Utilities Ld. whereby that company would purchase
"" from the shareholders of Nutrifood Products Ld. their preference
"" shares for 35s. per share and their ordinary shares for 15s. per
'"share. This matter was discussed very fully and it was agreed
"that Mr. Rosher, who had already been in negotiation with
"" Economic Utilities Ld., should take the matter up further with
'that company with a view to completing the transaction on the
"" above basis.

'

'

'(Sgd.) F. EB. Rosher. 30/11/48."

Upon the true interpretation of this minute there has been
much argument, to which I will return later.

Thereafter Rosher continued the negotiations and saw the
plaintiffs, Mr. Briess, Mr. Fischer, Mr. Jedlin and Mr. Pintus,
and it was ultimately agreed, on or about November 4, 1948, that
the plaintiffs would purchase all the shares in the company for
£12,000. Two meetings undoubtedly took place between the
plaintiffs and Rosher towards the end of October, probably on
October 20 and 28, and at one of these meetings Mr. Briess asked
Rosher explicitly whether the company had a licence and whether
they had a fat allocation, and Rosher answered in the affirmative
and explained that a minimum output of 250 gallons per week
was essential to a profit, whereas, according to Barry J.'s finding,
the company could not produce more than 150 gallons if they had
adhered to the Ministry's formula. When Rosher's fraud was
discovered the plaintiffs applied, on March 1, 1950, to Sir C. J. H.
McRea for redress, but liability was denied and this action was
then begun. Sir C. J. H. McRea died on June 19, 1951.

341

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Lord Oaksey.

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v.
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Lord Oaksey.

HOUSE OF LORDS [1954 |

At the trial, at the close of the case for the plaintiffs, counsel
for the defendant executors elected to call no evidence and sub-
mitted that there was no case for them to answer. The trial
judge overruled the submission, accepting the contentions made
on behalf of the plaintiffs as to the basis of those defendants'
liability, and holding: (i) that fraud had been committed by
Rosher after October 14, 1948, and thus during the period when
he had been authorized to act as agent on behalf, inter alios, of
the deceased; (ii) that the deceased, inter alios, had accepted
Rosher's negotiations effected prior to October 14, 1948, in such
circumstances as to assume responsibility for Rosher's fraud so
far as previously committed.

The action then proceeded, and on July 31, 1952, Barry J.
held: (1) that Rosher had been guilty of fraud by misrepresenta-
tion and concealment whereby the plaintiffs had been induced to
enter into the said agreement; (2) that the defendant executors
as representing the deceased were liable to the plaintiffs for the
fraud of Rosher on the grounds contended by the plaintiffs;
(3) that by reason of the said fraud the plaintiffs had suffered loss
and damage to the amount of £6,000 but that the defendants were
entitled to a deduction of £600 from this sum on account of the
fact that the plaintiff Cereal Manufacturing Co. (Chelsea)
Ld., who had contributed £4,800 of the purchase price of £12,000
paid to the shareholders of the company, in respect of which the
company had taken transfers of 1,905 preference shares of £1
each and 1,904 ordinary shares of 1s. each, had in fact sold such
shares in August, 1949, prior to the discovery of the fraud, for
the sum of £3,000.

Barry J. accordingly ordered that judgment be entered for
the plaintiffs against Rosher and the defendant executors for the
sum of £5,400 with costs other than those incurred by the joinder
of the plaintiffs Cereal Manufacturing Co. (Chelsea) Ld. and
that the said sum of £5,400 be apportioned between the plaintiffs
respectively, as to the plaintiff Briess £1,500, as to the plaintiff
Pintus £900, as to the plaintiff Strauss £450, as to the plaintiff
Fischer £750, and as to the plaintiffs Cereal Manufacturing Co.
(Chelsea) Ld. £1,800 (which last sum represented £2,400
less £600 deducted). Thereafter the trial judge heard and disposed
of the third party proceedings in which the defendant executors
claimed contribution from other former individual shareholders.
At the conclusion of such proceedings judgment was entered in
favour of the defendant executors against such third parties for a

A.C. AND PRIVY COUNCIL.

sum of money and costs in the case of each third party propor-
tionate to the value of his transferred shareholding in the company
related to the price paid for the shares in that company by the
plaintiffs upon the ground that Rosher, having acted as agent for
such third parties as well as for the said deceased, such third
parties were liable to make contribution as aforesaid towards the
liability of the defendant executors under the judgment in favour
of the plaintiffs.

The defendant executors appealed to the Court of Appeal on
the grounds that the trial judge was wrong in law in holding that
the deceased, and through him his estate, was liable for the fraud
of Rosher, and that there was no evidence on which the trial
judge could so hold. Rosher did not appeal against the judgment
and order. The plaintiffs cross-appealed against the judgment
and order of the trial judge in so far as the sum of £600 had been
deducted from the damages.

On February 17, 1953, the Court of Appeal (Lord Goddard
C.J., Morris and Romer L.JJ.) allowed the appeal of the defen-
dant executors, holding: (1) that there was no continued or
repeated fraud committed by Rosher in showing to the plaintiffs
balance sheets of the company and allowing the plaintiffs to
remain under the impression that the figures shown in such
accounts related to trading which he, Rosher, had fraudulently
represented the company to have been conducting lawfully and
in a material which could be lawfully sold; (2) that the doctrine
of ratification had no application to the circumstances of the
case on the ground that the shareholders (including the said
deceased) knew, and could know, nothing of Rosher's fraud;
(3) that the authority given to Rosher at the meeting of
October 14, 1948, was merely to accept an offer in stated terms
for the purchase of the shares in the company and was not an
authority to Rosher on behalf of the shareholders to negotiate a
sale.

At the hearing in your Lordships' House Mr. Salmon, on
behalf of the respondents, contended (1) that the shareholders did
not ratify Rosher's agency at the meeting of October 14, 1948;
(2) that the minute of that meeting showed on its true interpreta-
tion that Rosher was not given authority to make any
representations on the shareholders' behalf; (3) that in fact
Rosher made no misrepresentation after October 14, and that
his previous misrepresentations did not continue or have any
continued effect after October 14, 1948, when he became the agent
of the shareholders.

343

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v0.

WOOLLEY.

LordiOak Oaksey.

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0.
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Lord Oaksey.

.

HOUSE OF LORDS [1954 |

My Lords, I think that on the authorities, and particularly on
the judgment of the Court of Appeal in Marsh v. Joseph * it
cannot be said that the shareholders ratified Rosher's agency up
to October 14, 1948, as it was not proved that they had full
knowledge of all the facts or that there is sufficient evidence to
make it clear that they intended to ratify whatever he had done.

But, on the other hand, I am of opinion that, on the true
interpretation of the minute of the general meeting, it is clear that
Rosher was appointed on October 14, 1948, agent on behalf of all
the shareholders of the company to negotiate the sale of their
shares, and that in such circumstances the shareholders are
responsible for any fraudulent representations he made in the
course of those negotiations.

It was argued that there was no satisfactory evidence that he
made any further misrepresentations after October 14, 1948, but
even upon that assumption I am of opinion that in negotiating
from the outset on the basis that the company's accounts which
he put forward represented the true position of the company
Rosher continued to make that fraudulent representation up to
the time the contract was completed. It is not a case in which
an innocent misrepresentation has been forgotten or a truthful
representation has been changed into an untruthful representation
by a change of circumstances. From the first and throughout
the negotiations Rosher knew perfectly well that the plaintiffs
were negotiating in the belief that the accounts put forward by
him represented an authorized and legitimate business and his
fraud continued from minute to minute after October 14, 1948,
up to the time when he secured the completion of the contract
(cf. Spencer Bower on Actionable Misrepresentation, 2nd ed.,
pp. 77-8, Smith v. Kay,? Meluish v. Milton),

Apart, however, from this consideration I am of opinion that,
having regard to the attitude of counsel for the defendants at the
trial (see the cross-examination of Mr. Briess at pp. 46, 47, 48
and 49 of the appendix, Part II, to the printed case on the appeal
to the House of Lords, and the examination of Rosher, p. 91
D-G) and the evidence of Mr. Briess, there was sufficient evidence
to show that Rosher actually made further express misrepresenta-
tions after October 14, 1948—in particular in his admitted
representation that 250 gallons was a minimum for profitable
working.

For these reasons I am unable to agree with the judgment of

Y [1897] 1 Cho 213313 Ri: R. 136) 3 (1876) 3 Ch.D. 27, 85.
2 (1859) 7 H.L.C. 750, 769.

A.C. AND PRIVY COUNCIL.

the Court of Appeal, and I move your Lordships that the appeal
be allowed and the judgment of Barry J. be varied by increasing
the damages to £6,000 and the apportioned share thereof of the
Cereal Manufacturing Co. (Chelsea) Ld. to £2,400. The
appellants will have the costs here and below.

Lorp Rew. My Lords, the business of Nutrifood Products Ld.
was the manufacture and sale of synthetic cream. To manufac-
ture this substance they had to have a licence from the Ministry
of Food and an allocation of raw materials. They obtained the
licence on condition that they manufactured the cream according
to a formula approved by the Ministry. The company's under-
taking was small and the whole business was conducted by Mr.
Rosher, the managing director. From the outset Mr. Rosher
disregarded the formula and added much more water to the cream
than he was permitted to do. This was a criminal offence, but it
produced substantial profits which could not have been made by
lawful means. None of the other directors or shareholders were
aware of this and it is not suggested that they were culpable in
any way. Mr. Rosher concealed his offence from the Ministry by
making false returns.

When it became difficult to carry on this system Mr. Rosher
sought to sell the business. Without informing his co-directors
he approached the appellants, who he knew were willing to buy
the business. He told them truthfully that the company had a
licence and an allocation of raw materials and he showed them
accounts which were accurate, but he concealed from them the
fact that he had been acting illegally and that, if he had complied
with the conditions of the licence, the total output of cream would
have been so much smaller that the profits could not have been
made. It is not disputed that the false picture which he thus
presented to them was a fraudulent misrepresentation.

When negotiations had reached the stage of the appellants
provisionally agreeing to a price if all the shares in the company
were transferred to them, Mr. Rosher put the matter before the
other directors and then before the shareholders at meetings at
which the late Sir Charles McRea presided on October 14, 1948.
I shall have to consider later what occurred at those meetings.
Then, on November 2, the appellants, through Economic Utilities
Ld., a company controlled by them, offered to buy all the shares
for a total price of £12,000, and on November 12, Mr. Rosher
accepted that offer. All the shareholders signed transfers of
their shares in favour of the appellants and the sale was duly

345

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W OOo.uLzEY.

346

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HOUSE OF LORDS [1954 |

completed, £12,000 being received by the shareholders, including
Sir Charles McRea.

The appellants later discovered the fraud and after some
correspondence, on April 15, 1950, they raised the present action
against certain of the former shareholders, including Sir Charles
McRea, for £12,000 damages. The only respondents now are the
executors of Sir Charles McRea, who died after the raising of this
action and who was the chairman and largest shareholder in the
company, and if this appeal succeeds it is agreed that the appel-
lants are entitled to judgment against the respondents for £6,000,
being the difference between the price paid by the appellants,
£12,000, and the true value of the shares which they received,
which was £6,000. The ground of action is that in completing
the transaction Mr. Rosher acted as the agent of Sir Charles
McRea and the other shareholders and that all the shareholders

"who authorized him to act as their agent are jointly liable for the

damage caused to the appellants by his fraud.

The first question to be decided is the extent of the authority
conferred on Mr. Rosher by the shareholders. The only authority
which they gave to him was given at the general meeting of the
company held on October 14, 1948. No doubt it was convenient
to discuss and settle this matter at the general meeting, but the
arrangements which the shareholders made with Mr. Rosher were
not company business, and therefore the minutes of the meeting
were not, strictly speaking, the appropriate place to record these
arrangements. Nevertheless, the minutes of this meeting are the
only evidence in this case of what took place at the meeting, and
it has been accepted throughout that the nature and extent of
the authority which the shareholders then conferred on Mr.
Rosher are to be determined by a construction of the minutes.
The relevant part of the minutes is in these terms: '' The
'"" chairman reported that the directors had received a proposition
'with regard to the sale of the whole of the company's shares.
"At the present time great difficulties were being encountered
"owing to the restricted supplies of raw material with a conse-
"quent restriction in output resulting in losses being incurred
"by the company. There were no prospects in the immediate
"future of the allocation of raw materials being increased. The
'* proposition referred to had been received from Economie Utilities
"Ld. whereby that company would purchase from the share-
"holders of Nutrifood Products Ld. their preference shares for
'85s. per share and their ordinary shares for 15s. per share.
'This matter was discussed very fully and it was agreed that

A.C. AND PRIVY COUNCIL.

'" Mr. Rosher, who had already been in negotiation with Economic
" Utilities Ld. should take the matter up further with that
"company with a view to completing the transaction on the
' above basis.''

The respondents say that the true meaning of this minute is
that the shareholders only authorized Mr. Rosher to accept the
sum of money which was being offered and that they gave him
no authority to do anything else and, in particular, no authority
to make any representations on their behalf. This was the inter-
pretation accepted by the Court of Appeal. Lord Goddard C.J.
said*: '' I base my judgment on the ground that, so far as I can
"see, the minute of the general meeting in October does not
"give Rosher authority, or purport to give him authority, to

'

"negotiate on behalf of the company. It gave him authority to |

"accept what was being offered, a sum of money which he said
'"" that he could get for these shares.''

My Lords, I am unable to accept that interpretation. The
minute states that the directors had received a '' proposition."'
I do not think that '' proposition '' here means a firm offer. The
minute of the directors' meeting held earlier on the same day
shows that this '' proposition'' was submitted to the directors
by Mr. Rosher. It states that Mr. Rosher "' outlined a proposi-
"tion which had been made to him by Economic Utilities Ld."'
and that it was decided that this proposition should be placed
before the shareholders for their consideration. Mr. Rosher had
been negotiating with the appellants, but in fact he had not then
received any firm offer either from them or from Economic
Utilities Ld. His earlier conduct shows that he would not have
been deterred from making any statement which suited him
because he knew it to be untrue, but it appears to me to be
improbable that he would have told the shareholders that he
had a firm offer, because if by any chance the negotiations had
later broken down his false statement would have put him in
a difficult position with the shareholders. If he did not say
that a firm offer had been received, then the natural course for the
shareholders. to take was to authorize him to do all that was
necessary to complete the transaction, and as I read the last
sentence of the minute that is in fact what was done. Authority
to '' take the matter up further with that company with a view
'"to completing the transaction on that basis '' appears to me
clearly to include authority to make such further statements and
representations and to give such answers to any questions by

4 [1953] 2 Q.B. 218, 223-4; [1953] 1 All E.R. 717.

347

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H. L. (E.) the company and do such other things as he should think

1954

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Lord Reid.

desirable or necessary to achieve a sale.

If that be so, and if thereafter Mr. Rosher made any false and
fraudulent representations which brought about the sale, then it
was not disputed that the appellants must succeed. But the
evidence on this matter is not very satisfactory. There is evidence
that Mr. Rosher made such representations to Mr. Briess, one
of the appellants, after October 14, but this does not appear to
have been treated as a vital matter at the trial, and the findings
of Barry J. on the subject are not very specific. I am, therefore,
not prepared to decide the case on this ground, and I shall
consider it on the footing that all the relevant misrepresentations
were made by Mr. Rosher before October 14.

The respondents argue that a principal can only be vicariously
liable for acts done by his agent after he had become agent, and
therefore the shareholders cannot be liable for damage caused by
fraudulent misrepresentations made by Mr. Rosher at a time
when he had no authority to act for them any more than they
would be liable in respect of fraudulent misrepresentations made
by some third person with whom they never had any connexion
at all. The general principle of vicarious liability for fraudulent
misrepresentations is now well settled. I shall quote two short
passages from the speech of Lord Macnaghten in Lloyd v. Grace,
Smith & Co.* Lord Macnaghten quoted from Lord Blackburn's
speech in Houldsworth v. City of Glasgow Bank ® this passage,
dealing with the case of Barwick v. English Joint Stock Bank':
""The substantial point decided was, I think, that an innocent
"* principal was civilly responsible for the fraud of his authorized
'"agent, acting within his authority, to the same extent as if it
'""was his own fraud.'' Then Lord Macnaghten added §: '' That,
'""my Lords, I think is the true principle.'' Then Lord Mac-
naghten quoted ® with approval, the following passage from the
judgment of Bramwell L.J. in Weir v. Bell }°: '' every person
'"'who authorizes another to act for him in the making of any
'"' contract, undertakes for the absence of fraud in that person in
'the execution of the authority given, as much ag he undertakes
'' for its absence in himself when he makes the contract.'' That
passage from the judgment of Bramwell L.J. was also quoted
with approval by Viscount Haldane L.C. in Mair v. Rio Grande

5 [1912] A.C. 716, 735; 28 T.L.R. 547. 8 [1912] A.C. 716, 736.
6 (1880) 5 App.Cas. 317, 839. 9 Ibid. 737.
7 (1867) L.R. 2 Exch. 259. 10 (1878) 3 Hx.D. 288, 245.

A.C. AND PRIVY COUNCIL.

Rubber Hstates Ld.,11 and I might add one sentence from the
speech of Lord Moulton in that case !*: '' Now, it is elementary
"law that no person can take advantage of the fraud of his
"' agent."'

My Lords, I find it impossible to reconcile those general state-
ments of the law with the contention that a principal can disclaim
responsibility for fraudulent misrepresentations made by his
agent which, though made before the agency commenced, to the
agent's knowledge continued to influence the other party after his
appointment as agent and finally induced the other party to enter
into the contract which the agent had been authorized to make
and did make on behalf of his principal. The misrepresentations
were continuing representations intended to induce the other
party to make the contract, and when that party made the
contract to his detriment, a cause of action arose, and in my
opinion it arose against both the agent and the principal. The
agent continued to be fraudulent after he was appointed. It was
his duty, having made false representations, to correct them
before the other party acted on them to his detriment, but he
continued to conceal the true facts. Sir Charles McRea '' under-
'"took for the absence of fraud '' in Mr. Rosher in the exercise
of the authority given to him. But Mr. Rosher acted fraudulently
while executing that authority and in making the contract, and
on that ground I am of opinion that this appeal should be allowed.

I might add that counsel for the respondents stressed the
hardships that would result in this and other cases if the law is
so applied, but the hardships which would result if the law were
otherwise would be no less. If this remedy were not available to
the appellants, counsel was unable to suggest any other form
of remedy which would have been available to them, and if no
remedy was available to the appellants in this case, then the
hardship to them is obvious, but I do not think that cases of
this kind can or should be decided by balancing actual or possible
hardships.

My Lords, my noble and learned friend, Lord Asquith of
Bishopstone, is unable to be present this afternoon. He asks
me to say that he has read the speech which I have just delivered
and that he agrees with it.

Lorp Tucker. My Lords, it is not in dispute that the sale of
the shares in Nutrifood Products Ld. was induced by the fraud

11 [1913] A.C. 8538; 29 T.L.R. 692. 12 [1913] A.C. 853, 872-3.
A.C. 1954. 24

349

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Lord Reid.

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HOUSE OF LORDS [1954 |

of one Rosher who was a defendant in the action. The nature of
the fraud was that he represented that the profits of that company
had been made by lawful trading whereas, as he well knew as
managing director of the company, the profits had been made as
a result of the manufacture of greatly larger quantities of artificial
cream than could have been manufactured if the formula approved
by the Ministry of Food had been adhered to as required by the
licence granted by the Ministry. He never made an express
representation to this effect, but the trial judge, Barry J., found
that he had, by the production of the company's balance sheets
and his conduct throughout the negotiations, impliedly so
represented.

The question for decision in this appeal is whether the personal
representatives of Sir Charles McRea deceased, whose shares were
sold as a result of this fraudulent misrepresentation, are liable
to pay damages. The answer depends upon whether Rosher was
at any stage prior to November 12, 1948, on which date the
contract for the sale of all the shares in Nutrifood Products Ld.
to Economic Utilities Ld. as agents for the appellants was con-
cluded, the agent for the shareholders, including Sir Charles
McRea, to negotiate the sale and make representations on their
behalf,

Rosher had been tentatively approached with regard to a
possible sale of the shares of Nutrifood Products Ld. by one of the
appellants, Mr. Fischer, in 1947, but nothing resulted therefrom.
In the summer of 1948 Rosher re-opened the question by inviting
Fischer to lunch with him at his club. There were further inter-
views with some of the other appellants and by October 14, 1948,
the negotiations had reached a stage at which Rosher was in
a position to report to the shareholders and ascertain their inten-
tions. Up to this point they had no knowledge of the discussions
and it is not in dispute that prior to October 14 Rosher had no
authority from Sir Charles McRea or any other shareholder to
make any representation on their behalf. He had ascertained
that the appellants were disposed to pay 35s. per share for the
preference shares and 15s. for the ordinary shares, but the trial
judge has found that he had not by this date obtained a firm
offer at these prices and there was no evidence that at the
annual general meeting of the company on October 14 he ever
stated that he had obtained a firm offer.

As to what took place at this meeting the parties were
content to rely at the trial on the minutes of the company and
no evidence, apart from Rosher, was called by either side. It is

A.C. AND PRIVY COUNCIL.

true that Rosher in answer to questions by counsel for Sir
Charles McRea's representatives stated that by that time the
price had been agreed and the negotiations were concluded, but
this was not strictly accurate since no firm offer was then in
existence and in fact the offer by Economic Utilities Ld. six days
after the meeting was '" subject to contract."'

The nature of Rosher's authority can therefore only be ascer-
tained from a perusal of the minutes. The relevant portions of
the minute of the director's meeting at 12 o'clock on October
14 and of the company's annual general meeting at 2.80 p.m. on
the same day are as follows :—

Directors' Meeting

""Mr. Rosher outlined a proposition which had been made to
""him by Economic Utilities Ld. whereby that company would
'"" purchase from the shareholders of Nutrifood Products Ld. their
'"" preference shares for 35s. per share and their ordinary shares
'for 15s. per share. This was discussed very fully and in view
''of the difficulties being encountered in consequence of the
"" restricted supplies of raw material it was decided that the above
'" proposition should be placed before the shareholders at the
"" annual general meeting for their consideration."'

Annual General Meeting

'"The Chairman reported that the directors had received a
"proposition with regard to the sale of the whole of the com-
""pany's shares. At the present time great difficulties were being
'"encountered owing to the restricted supplies of raw material
'* with a consequent restriction in output resulting in losses being
'incurred by the company. There were no prospects in the
''immediate future of the allocation of raw materials being
"increased. The proposition referred to had been received from
''Keonomic Utilities Ld. whereby that company would purchase
'* from the shareholders of Nutrifood Products Ld. their preference
'* shares for 85s. per share and their ordinary shares for 15s. per
'share. This matter was discussed very fully and it was agreed
''that Mr. Rosher, who had already been in negotiation with
'' Beonomic Utilities Ld., should take the matter up further with
''that company with a view to completing the transaction on
'' the above basis."'

Barry J. held that the authority thus conferred on Rosher was
not limited to accepting an offer to purchase and arranging the
necessary transfers but that there being then no binding offer in
existence which Rosher could accept forthwith, he was given

351

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HOUSE OF LORDS [1954 |

authority to take the matter up further with the prospective pur-
chasers and to make any statements concerning the company's
business which might be required in order to induce them to
enter into a binding contract.

The Court of Appeal, on the other hand, have construed the
minute as conferring only the more limited authority, viz., to
accept what was being offered, i.e., a sum of money. My Lords,
I am unable to take such a limited view of the agent's authority.
It would have been perfectly simple to say in terms that he was
to '' accept the offer which had been received.'' Instead, the

ce 39) EGC

expressions "' a proposition with regard to the sale, whereby
'"' that company would purchase,'' "' Mr. Rosher, who had already
"been in negotiation,' "' should take the matter up further with
'the company,'' "' with a view to completing the transaction on
'""the above basis'' are used. This language is consistent with
the known facts that no firm offer capable of acceptance so as
to constitute a binding contract existed and that further negotia-
tions were in fact required to bring this about. But apart from
these facts the language of the minute is, I think, in such general
terms as to preclude the more limited construction.

My Lords, if, as I think, this is the proper construction of the
minute, Rosher was from that time until the completion of the
contract on November 12 the agent of Sir Charles McRea, inter
alios, to complete the negotiations and make a contract. He knew
more about the business of the company than anyone else and
would clearly have authority to answer all questions relevant
thereto and to make any statements in connexion therewith
necessary to bring about the desired result.

I do not think that the judge's judgment can fairly be read
as containing a specific finding that Rosher at any time after
October 14 expressly made any misrepresentation, but in his pre-
liminary judgment given at the close of the plaintiffs' case on a
submission of '' no case '' by counsel for the present respondents
he dealt with the respondents' liability on the basis that the
previous misrepresentations of Rosher were to be regarded as con-
tinuing down to the moment when the appellants' agents acted
on them. He said: ''I am quite satisfied that the representa-
"tions made by Mr. Rosher concerning the affairs of Nutrifood
'* Products, whether made before or after October 14, were con-
'' tinuing representations and remained continuing representations
"until the plaintiffs or their agents, Economic Utilities Ld., acted
'upon them by entering into a binding agreement to purchase

7

'"

A.C. AND PRIVY COUNCIL.

'" these shares in the beginning of November. These representa-
' tions, being continuing representations, the law regards them as
'"' being repeated from minute to minute during the whole period
'" between the time the representations were made and the time
""when they were finally acted upon.'' A little later he said:
"It was suggested at an early stage of the argument that the
"duty to make a disclosure as to the affairs of the company and
"to rectify misstatements which had been made about those
"affairs was a duty which fell only upon Mr. Rosher in his
"personal capacity, because it was his misrepresentations made
'in the early stage of the negotiations which caused that duty
"to arise. . .. I cannot take the view that it was merely a
'* personal responsibility falling upon Mr. Rosher, whether before
"or after October 14. After October 14, as I have said, I am
"" satisfied that Mr. Rosher was acting on behalf of the share-
"holders, and with their authority, and that if he allowed these
'" representations . . . to continue right up to the date of the sale,
"" he did so as from October 14 as agent for the named defendants,
"" among others, and they are, unfortunately for them, vicariously
"" responsible for that tort."'

My Lords, this is, in my opinion, a completely accurate state-
ment of the law. It was contended by counsel for the respondents
that when once the representations were made the wrongful act
was complete although no action for damages would lie until the
representee suffered damage. He argued that the representations
were not continuing but the consequences of the original represen-
tation continued, and accordingly, provided that the representor
was not the agent of the respondents when the original represen-
tation was made, they could not be held responsible because the
consequences of that representation took effect at a time when
the representor had become their agent.

'

'

No authority for this proposition was cited, and it is, in my
view, founded upon error. The tort of fraudulent misrepresenta-
tion is not complete when the representation is made. It becomes
complete when the misrepresentation—not having been corrected
in the meantime—is acted upon by the representee. Damage
giving rise to a claim for damages may not follow or may not
result until a later date, but once the misrepresentation is acted
upon by the representee the tortious act is complete provided
that the representation is false at that date. If false when made
but true when acted upon there is no misrepresentation. In
Spencer Bower on Actionable Misrepresentation, 2nd ed., p. 77,

353

Ep ey (Gs)
1954
BRIESS

v.
WOOLLEY.

Lord Tucker.

354

H. L. (&.)
1954
BRIESS

Uv.
WOO.LLEY.

Lord Tucker.

HOUSE OF LORDS [1954 |

article 78, it is stated: '' It is commonly said that the represen-
'tation must be shown to have been false when made. But this
''is not quite correct. The only real issue is—was it true or false
'when it was acted upon?'' In Halsbury's Laws of England,
2nd ed., Vol. XXIII, p. 29, para. 44, it is stated: '' Where there
''is an appreciable interval between the two dates above men-
'' tioned [i.e., date when made and date when acted upon], and
''the representation relates to an existing state of things, the
""representor is deemed to be repeating his representation at
'every successive moment during the interval, unless he with-
'"' draws or modifies it by timely notice to the representee in the
'"meantime.'' I do not think the accuracy of these statements
can be challenged. It is true that there does not appear to be any
express authority which can be quoted as an example of the
application of this principle to a case of principal and agent where
the agency commences after the making of a representation which
is allowed by the agent to continue uncorrected with knowledge
of its falsity until acted upon. I agree, however, with Barry J.,
that the duty of the agent, who has made the misrepresentation,
to correct it cannot be regarded as only a personal obligation. If
he has in the meantime been appointed agent with authority to
make representations for the purpose of inducing a contract he,
in his capacity as agent, is by his conduct repeating the represen-
tations previously made by him. This is more particularly the case
where the misrepresentation results from silence with regard to
matters which if revealed would have rendered false statements
which standing by themselves were literally true. The present
is such a case. Having given information with regard to the
profits of the company Rosher's silence both before and after
October 14 as to the nature of those profits rendered that informa-
tion false. His fraud was a continuing fraud which became
tortious when acted upon by the appellants' agents on November
12, 1948.

The judge awarded the appellants £5,400 damages. It was
contended by counsel for the appellants and agreed by counsel
for the respondents that if the appellants were entitled to succeed
the damages should have been £6,000, of which sum the appor-
tioned share of the Cereal Manufacturing Co. (Chelsea) Ld. would
be £2,400.

For the reasons stated above I would allow the appeal and
vary the judgment of Barry J. by increasing the damages to
£6,000 and the apportioned share thereof of the Cereal Manufac-
turing Co. (Chelsea) Ld. to £2,400.

A.C. AND PRIVY COUNCIL.

Lorp Conen. My Lords, it is common ground between the
parties that prior to October 14, 1948, Mr. Rosher had no
authority to act in relation to the sale of the shares in Nutrifood
Products Ld. (to which company I shall refer hereafter as '' the
'"" company '') on behalf of any of the shareholders of the company
other than himself. It is also common ground that at the annual
general meeting of the company held on that day the shareholders
conferred on him some authority. The first question which your
Lordships have to determine is as to the extent of that authority.
No shareholder in the company other than Mr. Rosher was called
as a witness at the trial. The parties treated the minutes of that
meeting, which were signed by Mr. Rosher, as being a correct
record of the proceedings thereat.

In the Court of Appeal the Lord Chief Justice, with whom
Morris L.J. and Romer L.J. agreed, construed that minute as
not recording any authority to negotiate a sale on behalf of the
shareholders but as recording only authority to accept an offer
which had already been made. Had I been able to construe the
minute in this sense I should, I think, have agreed with the
decision of the Court of Appeal, but I am unable so to construe it.
The language of the concluding sentence of the minute—'' It was
'"" agreed that Mr. Rosher, who had already been in negotiation
'" with Economic Utilities Ld., should take the matter up further
'" with that company with a view to completing the transaction
'"on the above basis ''—seems to me inconsistent with so limited
an authority as that for which the respondents contend. Had
that been the intention it would have sufficed to record that it
was agreed that Mr. Rosher should accept the offer on behalf
of all the shareholders.

It is plain that prior to the meeting Mr. Rosher had in fact
received no definite offer from the proposed purchasers and there
seems no reason why he should have lied to the shareholders on
this point. The use of the word '' proposition'' with regard
to the sale of the whole of the company's shares suggests that he
told the shareholders that the matter was still in the stage of
negotiation, and the concluding sentence which I have already
quoted confirms that view. If that be so, I think the form of
the minute necessarily involves that Mr. Rosher was authorized
by the shareholders to give on their behalf such information as
to the business of the company as the proposed purchasers
might require before they would turn their proposition into a
definite offer.

355

Hy L. (Ei)
1954

BRIESS
0.
WOOLLEY.

356

Hi T.- (Bt)
1954
BRIESsS

v.
WOOLLEY.

Lord Cohen.

HOUSE OF LORDS [1954]

On this basis Mr, Gardiner argued that the shareholders were
liable for Mr. Rosher's admittedly fraudulent misrepresentations
on the ground (a) that they were repeated after October 14, 1948,
and before the contract became binding on November 12, 1948, or
alternatively, (b) that the misrepresentations, though made
before October 14, 1948, were continuing representations which
neither Mr. Rosher nor his principals corrected before
November 12.

The first of these grounds raises a pure question of fact, and
Mr. Salmon did not dispute that if the trial judge had found
on evidence that fraudulent misrepresentations had been made
between October 14, 1948, and November 12, 1948, the appellants
would be entitled to succeed. Unfortunately, there is no clear
finding on this point. The judge had first to consider it when
ruling on a submission by Mr. Conolly Gage that there was no
evidence that the late Sir Charles McRea was responsible in tort
for the alleged misrepresentations. In the course of his obser-
vations on this submission the judge said: '' It is not clear, as
'"Mr. Gardiner has conceded, whether or not any specific state-
'"ments were made about the company's business after that date,
""or whether the relevant balance sheets and accounts of the
"" company were shown to the plaintiffs, or any of them, before or
"after that date.'' Had the matter rested there, the appellants
would have failed to discharge the onus which rested on them of
proving a fraudulent misrepresentation after October 14, 1948.

The judge had, however, to consider the matter again when
giving judgment at the conclusion of the hearing. In the course
of his observations he said: "' Mr. Briess was, of course, also
'"'interested in these matters, and he tells me (and I accept
'"' his evidence as to this—indeed, there is no real dispute about
' it) that he was concerned about whether this company had a
'licence to produce this cream from the Ministry of Food. He
'knew that a licence was necessary and he was concerned to
'"" know whether or not the company had the necessary allocation
'of materials, and he raised both those points with Mr. Rosher
"and Mr. Rosher confirmed that the company had a licence and
" that it had the necessary allocation of materials. Throughout
"the profit figures that were shown on the company's accounts
"for the three years I have mentioned were treated as being
"the profits earned by the company in respect of their trading
activities during those three annual periods. Shortly before
"the final bargain was made, Mr. Briess and Mr. Fischer (and,
""T think, also Mr. Pintus) all went out to visit the Nutrifood

A.C. AND PRIVY COUNCIL.

'factory at Acton. There they saw Mr. Rosher and saw the
"manufacturing process going on. They did not go into any
"details on that occasion, but Mr. Rosher met these three
"gentlemen (some of them for the first time) and that interview
"is said to have taken place somewhere about October 20,
""1948.'' This reference to October 20, 1948, is, I think, a
mistake for October 23, 1948. This extract leaves it in doubt
when the questions were asked by Mr. Briess, but there is some
evidence to support the view that no interview between
Mr. Rosher and Mr. Briess had taken place before October 20,
1948. Later in his judgment, while dealing with the question
whether there was any false representation, the judge refers to
a statement which Mr. Rosher says he made to Mr. Briess at
an interview in Mr. Briess's office in October shortly before
Mr. Briess's visit to the company's factory. That statement
was to the effect that a minimum output of 250 gallons per
week was essential before the business could show any margin
of profit. From some of the evidence it seems probable that
this interview at Mr. Briess's office took place on October 20,
1948. The judge points out that a production of 250 gallons
per week must, to Mr. Rosher's knowledge, have been utterly
impossible except by a watering down of the mixture to such
an extent that the fat content was half or less than half of
the minimum required by the Ministry. He concludes his
observations on that part of the case by saying: "' With all that
'" knowledge, it seems to me, to represent that the company was
"" operating under a licence granted by the Ministry (a licence
'in the terms I have indicated) was a false representation. I
"am forced to the conclusion, in all the circumstances of this
'ease, that that false representation was made knowingly, with
'"a view to inducing these gentlemen (the plaintiffs in this case)
'"and the company now associated with them as co-plaintiffs, to
'" purchase the shares in this company."'

He then proceeds to consider the question of the liability of
the other shareholders for Mr. Rosher's fraudulent misrepresen-
tations. After referring to his decision on the submission and
saying that he need not repeat what he said then, he continued:
''T cannot see that Mr. Rosher's evidence has carried the matter
'' any further than the point to which it has been carried at the
'' close of the plaintiffs' case. I am bound to say, for the reasons
'' which I indicated in ruling upon Mr. Gage's submission, that
'"T have come to the conclusion that his clients, the represen-
''tatives of the late Sir Charles McRea—although no one has.

'

'

'"

357

H. L. (E.)
1954

Brisss
v.
WOOLLEY.

Lord Cohen.

358

fal, Ib (sis)
1954
BRIESS

v.
WOOLLEY.

Lord Cohen.

HOUSE OF LORDS [1954 |

'suggested that Sir Charles McRea was personally implicated
'"in any way in these representations which I have found to be
'' fraudulent—are none the less liable to the plaintiffs for the
'* damages which flowed from those fraudulent representations on
'"the ground that the representations, or some of them at some
'period, were made by Mr. Rosher acting as Sir Charles
'" McRea's agent and on his behalf.'' This seems to suggest
that part of the misrepresentations complained of were in fact
made after October 14, 1948, but having in mind that the onus
is on the appellants, I should hesitate in the absence of a clear
finding to decide this case in their favour on this ground. I turn
therefore to the question of continuing misrepresentation.

Mr. Gardiner relied on a statement of the principle of
continuing misrepresentation to be found in Spencer Bower on
Actionable Misrepresentation, 2nd ed., p. 8, which reads as
follows: '' In any case where there is an interval between the
"" representation and the alteration of position induced thereby,
'the representor is at liberty to withdraw or modify the repre-
"" sentation at any time during such interval. Unless so with-
'drawn or modified, and, if modified, subject only to the
'" modification, the representation is deemed to be repeated at
"each successive moment during the whole of such interval,
""and is hereinafter called ' a continuing representation.''' This
statement is based on some observations of Lord Cranworth in
Smith v. Kay,'* where he said of a representation in issue in
that case: '' It is a continuing representation. The representa-
""tion does not end for ever when the representation is once
""made; it continues on.'' The headnote in the case seems to
suggest that Lord Wensleydale doubted the correctness of this
statement, but I am unable to find any such doubt expressed
in his speech. I respectfully agree with the observation of
Lord Cranworth and adopt the statement of principle I have
cited from the work of Mr. Spencer Bower.

Mr. Spencer Bower was at that stage, however, dealing with
the position as between the maker of the representation and the
person to whom it was made. He was not considering the
question of the responsibility of a principal for the fraudulent
misrepresentation of his agent. I turn therefore to the question
whether, on the assumption that the statements from which
the fraudulent misrepresentation arises were not repeated after
October 14, the respondents are liable for the fraudulent

1h vival by Gihe Lists YR:

A.C. AND PRIVY COUNCIL.

misrepresentation of their agent, or, to be more accurate, for his
fraudulent failure to correct the false impression he had made,
it being admitted that they were themselves innocent of any
fraud.

My Lords, in my opinion, on the facts of this case this
question must be answered in the affirmative. Mr. Rosher when
he became the agent of the respondents was under the duty as
between himself and the appellants to correct the false impression
that his misrepresentations had made. He had become the
agent of the respondents to complete the negotiations for the
sale of their shares as well as his own shares to the appellants.
His authority extended to giving the appellants information as
to the business of the company. It cannot be denied that if he
had made a new fraudulent statement as to that business the
respondents would have been liable to the appellants in damages
for that fraud. It seems to me necessarily to follow that they
must be liable for his fraudulent failure to withdraw or modify
the false statement he had already made.

In view of the conclusion I have reached on this point it is
unnecessary for me to express ay opinion as to whether
Mr. Gardiner was right in his alternative submission that by
appointing Mr. Rosher their agent on October 14 with the
authority I have indicated the shareholders accepted respon-
sibility for the representations he had made before that date.

My Lords, I do not think that the decision of your Lordships
in this case will have the widespread consequences which Romer
L.J. feared; for the difference between your Lordships and the
Court of Appeal turns not on any question of law, but on the
view your Lordships have formed as to the extent of the
authority conferred on Mr. Rosher at the meeting on October 14.

For the reasons I have given I would allow the appeal with
costs here and below. In view of the admission by Mr. Salmon
that he cannot support the deduction of £600 which Barry J.
allowed because of the resale by the Cereal Manufacturing Co.
(Chelsea) Ld. of the shares acquired by it, I agree that judgment
should be entered for the appellants for £6,000 apportioned as
stated in the order of Barry J. dated July 31, 1952, save that the
amount apportioned to the Cereal Manufacturing Co. (Chelsea)
Ld. should be increased to £2,400.

Appeal allowed.