Smith v Kay
| Jurisdiction | UK Non-devolved |
| Judgment Date | 14 April 1859 |
| Court | House of Lords |
| Date | 14 April 1859 |
English Reports Citation: 11 E.R. 299
House of Lords
Trustee and Solicitor - Security - Fraud - Misrepresentation - Pleading - Bill - Evidence.
Mews' Dig. vi. 446; vii. 160, 166, 189, 411. S.C. 30 L.J. Ch. 45; and, below, 21 Beav. 522. Cited on point as to catching bargains (7 H.L.C. 771) in Aylesford v. Morris, 1873, L.R. 8 Ch. 491.
GEORGE SMITH,-Appellant; WILLIAM KAY,-Respondent [March 28, 29, 31. April 1,4,8, 11, 12, 14, 1859]. [Mews' Dig. vi. 446; vii. 160, 166, 189, 411. S.C. 30 L.J. Ch. 45; and, below, 21 Beav. 522. Cited on point as to catching bargains (7 H.L.C. 771) in Aylesford v. Morris, 1873, L.R. 8 Ch. 491.] Trustee and Solicitor-Security-Fraud-Misrepresentation-Pleading-Bill- Evidence. In a bill to set aside securities the Petitioner alleged that when, he executed the securities he " was led by the Defendant to believe, and did in fact believe, that the Defendant had become possessed of the bills for the amount of which such securities were given to him," in a certain manner which was not the true manner; and " under the circumstances aforesaid, the execution of the sureties was obtained by fraud and misrepresentation, or concealment of the real facts ": Held, that whatever objections might have been raised on demurrer to the sufficiency of this mode of allegation, it was too late after evidence aad hearing to raise any. Qu. (by Lord Cranworth) whether under the authority of Williams v. Lord Jersey (Craig and Phil. 91), such an allegation would not have been sufficient even on demurrer. When a party has practised a deception with a view to a. particular end, which has been attained by it, he cannot be allowed to deny its materiality. The 299 VII H.L.C., 751 SMITH V. KAY [1859] onus probandi that the end was not so attained lies on the party who used the deception. A security given for the payment of a. bill, which has existence only- through a fraud, cannot be made available by the supposed holder of the bill, though he may be untainted by the fraud to which it [751] owes its origin, but he must rely on the bill alone, and can derive no benefit from the fraudulent security. If a bill in equity is supported only by the testimony of a single witness, and is positively, clearly, and precisely denied by the Defendant, it will be dismissed : secus, if it is corroborated by letters of the Defendant or other sufficient evidence. Representations inducing a person to enter into a. particular contract, though not made at the moment the contract is actually entered into, constitute, if fraudulently made, dolus dam locum, contractui. dub. Lord Wensleydale. The jurisdiction of Courts of Equity will be employed to protect infants, and is not confined to cases where there has been an abuse of a strictly fiduciary character. The principle on which relief is given applies to all cases where influence is acquired and abused, and confidence reposed and betrayed. In the former influence is presumed, in the latter its existence must be proved. Observations on the moral duties of a defrauded person. This was an Appeal against a Decree of the Master of the Rolls (21 Beav. 522). Kay was a young man of fortune. Smith: was an attorney and solicitor. Kay succeeded under his father's will to a life interest in real estate., amounting to above £6000 a year, and to' above £120,000 in the funds. He came of age on the llth of April 1854. During the last two years of his minority, he had been acquainted with a person named Johnston, and had indulged in habits of reckless extravagance. His immediate wants were supplied by Johnston from thei produce of bills which he accepted to the amount of more than £53,000. He believed that these bills had been discounted by various persons through the intervention of Johnston; in fact most of them were in the hands of Johnston. As April 1854 approached, he was advised by that person to buy them up. Johnston, who had previously been introduced by Smith to Adams, introduced Adams to Kay as a person who' would buy up the bills if he [752] was made secure of their being paid on Kay coming of age. Kay, on the 1st April 1854, wrote a letter to Adams, on the subject of his getting in the bills, and made a promise to that effect. Kay was informed that his wishes had been complied with, and that Adams had bought up most of the bills, but that some to the amount of about £12,000 were in the hands of Smith, who had bought them up at the request of Adams, as Adams was alarmed at the idea of being a holder to such a large amount. In this way Smith also was introduced by Johnston to Kay. On the 12th. April 1854, the day after Kay became of age, a meeting of these parties took place, no' solicitor or friend was there on the part of Kay, but Smith produced some deeds which he had previously prepared, and Kay executed them. Among these were a, bond to the amount of £12,594 and an assignment of some life policies, which securities: were executed by Kay in favour of Smith. On the 7th November 1854 Kay filed a bill against Smith, setting forth the transactions between himself and Smith, and the persons named Johnston and Adams, and praying that the bond and the securities executed by him, Kay, on the 12th April 1854, ought to stand only for so much money as had been actually paid by Smith for several bills of exchange got in by him, together with interest at five per cent., that an account might be directed, that an injunction might issue to stay an action, then brought on these securities, and for farther relief. On this bill proceedings took place in the Court of Chancery. The parties gave evidence before the examiners, and the injunction was granted and was ordered to be continued till the cause should be heard. On the 13th June 1855, Kay filed an amended bill. This amended bill set forth the circumstances of the dealings between Johnston, Adams, Smith, and Kay, in rela-[753]-tion to the bills of exchange to secure payment of which the bond and securities in question had been given; and paragraph 44 alleged as follows;.-"If the Defendant did, in fact, discount and give full consideration for the bills for the amount of which such securities were given to him as aforesaid (which the Plaintiff 300 SMITH V. KAY [1859] VII H.L.C., 754 does not admit to have been the case), still the Plaintiff submits that the Defendant is not entitled, as against the Plaintiff, to the benefit of such securities; for the Plaintiff shows, that when he executed the same, he had not been informed, and he did not know that the Defendant had ever discounted any of the bills accepted by the Plaintiff as aforesaid, and when he executed the said securities he was led by the Defendant to believe, and he did in fact believe, that the Defendant had become possessed of the bills for the amount of which such securities were given to him as aforesaid, in the manner hereinbefore mentioned, pursuant to or in consequence of the application which the Plaintiff made to the said Samuel Adams to take up or get in the said bills." The 46th paragraph was in these terms:-" Under the circumstances aforesaid, the Plaintiff submits that the execution of the securities, so as afore^ said given by him to the Defendant, was obtained by fraud and misrepresentation, or concealment of the real facts, and that the Defendant ought, not to have the benefit of such securities against the Plaintiif, and that such securities ought to be delivered up to be cancelled." The prayer of the bill was that the bond and securities might stand for such principal sum only, if any, as Smith actually paid for getting in the bills, with five per cent, interest; that an account might be taken; that if it should appear that Smith did not pay any sum, that the bond and securities might be cancelled ; that on payment of whatever should be found due certain policies of assurance should be delivered up ; that Smith [754] should be restrained from proceeding at law against him, and for farther relief. The cause having been heard before the Master of the Bolls, his Honour, on the 29th February 1856, pronounced a decree by which it was declared that the bonds and securities, dated 12th April 1854, were void as against the Respondent; a perpetual injunction against proceeding at law on these securities, or on the bills, was ordered, and it was likewise, by consent, ordered, that Smith should be at liberty to attend the taking of the accounts in the case of Kay v. Johnston (21 Beav. 536), which was then pending in Chancery, for the purpose of establishing his claims (if any) against such balance (if any) as might be found due from them to Johnston, and Smith was ordered to pay Kay's costs. This was the decree appealed against. The Attorney-General (Sir F. Kelly) and Mr. Rolt (Mr. Jessel was with them) for the Appellant:-The Bill is defective. It does not allege a case of fraud and mis^ representation such as to justify the interference of a Court of Equity. The allegation that the Plaintiff was " led to believe " that the Defendant had not discounted the bills, but had purchased them up or got them in from third parties, is too vague to be answered either in pleading or in proof. There is nothing to show that the Appellant was party or privy to the means by which the Respondent was " led to believe," nor are the allegations in the amended bill sufficient to allow proof that the Appellant was party or privy to such means. There is no fraud here alleged or proved in the making of the contract, but to justify the decree there ought to be fraud dans locum contractui. Some of the evidence, consisting of letters, especially one of the 1st of April 1854, from Adams to Kay, was [755] therefore, improperly admitted; but even if properly admitted, it was not sufficient to justify the decree. The Respondent knew all along that the Appellant had originally discounted the bills; but even if he did not, he was not induced by a mistaken belief...
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...W.A.C.A. 171 311 Sanderson v. Blyth Theatre Co. (1903) 2 K.B. 533. 35 Shorunke v. The King (1946) A.C.316, 327. 283 Smith and Kay (1859) 11 E.R. 299; (7 H.L. Cas. 750). 62 Smith v .Seghill Overseers (1875) L.R. 10 Q.B 422. 46 Stuart v. Bruce (1798) (3 Ves. Jr. 632) 30 E.R. 1194. 130 Studham......