Wakilii

Mare and Others v Akerhielm and Another (Civil Appeal No. 57 of 1955)

East African Court of Appeal · [1950] EACA 214 · 1950 Appeal Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Civil appeal from the Supreme Court of Kenya challenging dismissal of a deceit action
Decision
Appeal allowed. Respondents held liable for deceit. Appellants awarded damages totalling Sh. 45,000 plus interest and costs.

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Court of Appeal allowed the appeal, holding that the trial judge misdirected himself by failing to draw an adverse inference from the respondents' failure to call their solicitor as a witness. The statement that about one-third of the capital had been subscribed in Denmark was untrue. The respondents either knew it was untrue or made it recklessly, not caring whether it was true or false. Damages were assessed at the full amounts invested, as the shares were worthless from inception due to radical defects in the project.

Outcome

Appeal allowed. Respondents held liable for deceit. Appellants awarded damages totalling Sh. 45,000 plus interest and costs.

Facts

The respondents issued a circular letter inviting persons in Kenya to subscribe for shares in Dantile Ltd., a company to manufacture tiles under a Danish patent. The letter stated that the tile had been successfully produced and sold in Denmark, that patent rights had been procured for most countries in Africa, India and Pakistan, and that about one-third of the capital had already been subscribed in Denmark. The appellants subscribed and paid for shares totalling Sh. 45,000. The company never commenced commercial operations and was wound up. The appellants received nothing. At trial, the judge found two statements were untrue but that the respondents honestly believed them to be true, and dismissed the suit. The respondents claimed their solicitor had settled the wording of the letter, but did not call him as a witness.

Issues

  1. Whether the respondents made false statements in a circular letter inviting subscriptions for shares in a company.
  2. Whether the respondents made such statements fraudulently, knowing them to be false or recklessly not caring whether they were true or false.
  3. Whether the trial judge misdirected himself in finding that the respondents honestly believed the statements to be true.
  4. What is the proper measure of damages in an action for deceit where shares purchased became worthless.

Orders

  • Appeal allowed.
  • Judgment and decree of the Supreme Court set aside.
  • Judgment entered for the first appellant for Sh. 10,000 damages for deceit.
  • Judgment entered for the second appellant for Sh. 20,000 damages for deceit.
  • Judgment entered for the second and third appellants jointly for Sh. 15,000 damages for deceit.
  • Interest awarded on the sums due from the date of the judgment set aside until realization.
  • Costs of the suit in the Supreme Court awarded to appellants on the higher scale with a certificate for two advocates, one of them a Queen's Counsel.
  • Costs of appeal awarded to appellants with costs of two advocates, but charges for making and certifying copies of the record under items 18 and 19 of Scale A in the 3rd Schedule to the Rules disallowed.

Rules and key headnotes

Deceit — Fraudulent Misrepresentation — Test for Fraud
To establish fraud in an action for deceit, a plaintiff must prove that the defendant made a false statement (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false.
Adverse Inference — Failure to Call Available Witness
Where a party relies on communications with a solicitor to establish honest belief in the truth of statements, and the solicitor is available but not called as a witness, an inference unfavourable to that party can and should be drawn from the failure to call the solicitor.
Privilege — Inability of Opposing Party to Call Witness
Where evidence sought from a solicitor would be excluded by privilege, the opposing party cannot usefully call that solicitor as a witness. A trial judge misdirects himself if he assumes the opposing party could have called the solicitor to contradict claims of reliance on the solicitor's advice.
Deceit — Recklessness — Knowledge and Opportunity
Where persons with knowledge of business affairs and opportunities to know the true facts make statements in invitations to subscribe for shares, and those statements are untrue, the court may find they made the statements recklessly and careless whether they were true or false, even if they claim to have believed them.
Deceit — Measure of Damages — Worthless Shares
In an action for deceit where a plaintiff was induced to purchase shares that prove worthless from inception due to radical defects inherent in the project, the measure of damages is the full price paid for the shares, not merely the difference between the price paid and the real value at the time of purchase.
Costs — Defective Record on Appeal
Where an appeal record is in deplorable condition, omitting material documents and parts of evidence and arranged without regard to the rules, the court may disallow the charges for making and certifying copies of the record while awarding the remaining costs of the appeal to the successful party.

Legislation cited (1)

  • Indian Contract Act s.17

Cases cited (3)

  • Derry v Peek (1889) 14 AC 337
  • Benmax v Austin Motor Co Ltd [1955] AC 370
  • Twycross v Grant (1877) 2 CPD 469

Full judgment

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Mare and Others v Akerhielm and Another (Civil Appeal No. 57 of 1955) [1950] EACA 214 (1 January 1950)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.