CORRESPONDENCE
| DOI | http://doi.org/10.1111/j.1468-2230.1956.tb00353.x |
| Date | 01 March 1956 |
| Published date | 01 March 1956 |
CORRESPONDENCE
The General Editor,
The Modern
Law
Reuiew.
Sir,
I
should be grateful for the opportunity to reply briefly to Professor
Gower’s comments on my article on
Eiouldsworth
v.
City
of
Qlasgow
Bank.
May
I
begin by saying that in the last sentence of my article
I
rather over-
stated my case when
I
said that the House of Lords were fully conscious
of the company’s separate legal personality;
I
should have said that Lords
Cairns and Selborne were fully conscious of this.
Professor Gower is quite correct when he says that, if my method of
calculating the damages is applied to his hypothetical case,
B,
C
and
D
would be no worse
off
if
A
were allowed to claim damages without rescinding
than if he first rescinds and then claims damages. Professor Gower is,
however, under
a
misapprehension as to my argument.
I
did not say that
the decision in
Houldmorth’s
case was intended to protect the shareholders
from being placed in a worsc position than if Houldsworth had rescinded
and then claimed damages, but that it was to protect them from a claim
by Houldsworth that
wns
inconsistent with his contract with his fellow
shareholders. Taking the example given by Professor Gower when
A,
B,
C
and
D
subscribe for their shares they contract with each other that the
net assets shall be shared equally between them. The consequence of
A’s
claim for damages for the fraud inducing his subscription would be to give
A
$2,600
of the
S8,OOO
and the other three
$1,8333
each. If the contract
is still subsisting when
A
makes his claim for damages,
B,
C
and
I)
can justi-
fiably set up the defence that, althqugh
A
agreed that he should only be
entitled to one quarter, he is now saying that not merely at the very moment
that they entered into this contract with him but by their very act in
so
doing
they incurred
A
liability towards him, which sets
at
nought this agreement:
to award
A
damages would be to allow him to break his agreement with
them, and this the House of Lords would not sanction. Obviously, if
A
claims rescission as well as damages, this defence is not open to
B,
C
and
D
for the contract no longer exists as far as
A
is concerned; in this case,
therefore,
A
is able to obtain damages.
I
feel, therefore, that Professor
Gower, whilst rebutting an argument which
I
did not advance, has failed
to demonstrate the falsity of my explanation of the case.
I
also feel that
Professor Gower has failed to answer the argument in the penultimate
paragraph of my article.
Professor Gower is, of course, entitlcd to his opinion that my explanation
is
unsatisfactory, though
I
may be pardoned for thinking, for the reasons
indicated above, that he has not demolished my arguments at all. When,
however, in the closing sentences of his Reply, he seeks to defend his own
explanation
of
the case,
I
feel that he is putting himself into an impossible
position. Whereas
I
regard the decision in
Houldnuorth‘s
case
as
fully
justified, he has made it clear from the very start that hc regards it as
unsatisfactory, and once again in his Reply he stigmatizes the practical results
of the case (under either explanation) as “absurd.” If he is convinced that
his explanation is
a
sound one, then surely he must acknowledge that the
decision itself
is
justified.
4th January
1966.
He cannot
I‘
have it both ways.”
Yours fnithfully,
J.
A.
Honwnu.
185
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