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Facts[]

Smith and Allan were directors of Wren. They wanted a loan, so they put up shares in another company that Wren owned as collateral with the Bank. Smith had the bank cash in shares without Allan knowing, who thought that the shares were still in place. Allan went to the bank to ask about them and they said they would "get back to you later on the details". The bank claimed the balance owing in place of the collateral from Allan.

Issue[]

  1. Was there a misrepresentation of fact?

Decision[]

Judgment for the defendant.

Reasons[]

Munroe held that Allan had laboured under the mistaken belief that collateral security pledged by the company was still at the bank. He had not been informed of any sale or exchange, his signature was required for banking transactions, and neither he nor the company had ever authorized Smith to act as agent. He had been materially misled by the words, acts and conduct of the Bank. Satisfied that Allan would not have signed the second loan guarantee if he had known all the facts, Munroe found he was induced by misrepresentation (failure to disclose facts) to sign the second agreement. In the circumstances, he is not liable for repayment of the second agreement.

Ratio[]

  • Failures or omissions can qualify as a misrepresentation.
  • Negligent misrepresentation permits recission.
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