Edgington v Fitzmaurice (1885) 29 Ch D 459

Facts

• The directors of a company issued a prospectus offering debentures to raise capital, stating that the funds would be used for business expansion, including alterations to buildings, growth of trade, and purchase of horses and vans.
• In reality, the directors intended to use the funds to pay off existing debts.
• Mr. Edgington purchased debentures, influenced by the stated intended use of funds in the prospectus, but also mistakenly believed he was obtaining a security interest in the company's property.
• After the company's collapse, Mr. Edgington sued the directors for damages in deceit, alleging misrepresentation regarding the directors' true intentions for the debenture funds.

Issues

1. Whether a statement of intention can be considered a statement of fact for the purpose of misrepresentation in contract law.
2. Whether the directors' misrepresentation about the intended use of funds was actionable, given Edgington was also influenced by his mistaken belief about a security interest.
3. Whether the misrepresentation must be the sole inducement for the claimant's action, or if partial inducement is sufficient for liability in deceit.

Decision

• The Court of Appeal held the directors liable for deceit based on their false statement of intention.
• The court determined that a misrepresentation need not be the sole cause of the claimant's action; it is sufficient that it was a material inducement.
• The judges found that because the directors knew their declared intent was false at the time, they were liable for fraudulent misrepresentation.

Legal Principles

• A statement as to a person's present intent is a statement of fact and can amount to a misrepresentation if not true when made.
• For the tort of deceit, the misrepresentation does not need to be the sole cause; proof that it materially induced the claimant's action suffices.
• Statements of intention are actionable misrepresentations if declared falsely with actual knowledge of contrary intent.
• The remedy for fraudulent misrepresentation (deceit) is damages to compensate for loss resulting from reliance on the misrepresentation.

Conclusion

Edgington v Fitzmaurice established that a false statement of intention is a misrepresentation of fact, broadening actionable misrepresentations in contract law. The decision clarified that material inducement, rather than sole causation, is sufficient for deceit, holding parties accountable for false representations of intended future actions.