Edgington v Fitzmaurice [1885] 29 Ch D 459

• Plaintiff bought bonds in a company based on false statements as to what the money would be spent on (company claimed it was for developing the business whereas in fact it was to meet existing debt payments) and as a result, when the company collapsed, he got very little return on the investment.

• He sued Defendant (officers of the company. CA allowed his claim, since he was induced to pay for bonds based on the fraudulent misrepresentation as to the purpose of the money raised. 

Cotton LJ

• It was material that the money was used for a purpose other than that claimed since a man who lends money “reasonably wishes to know for what purpose it is borrowed” and obviously if Plaintiff had known the truth he would not have invested it.

• It didn’t matter that there was another issue (charge on the property) which was critical but “it was not necessary to show that the misstatement was the sole cause of his acting as he did” and it was irrelevant that he was also influenced by another factor. 

Bowen LJ

• A misstatement is material if it was “actively present in his mind” when he decided to pay the money.

The state of a man’s mind is as much a fact as the state of his digestion.

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