What is the test for recoverable damages for fraudulent use of shares of an insolvent company?
Manitoba, Canada
The following excerpt is from 221 Corporation Ltd. v. C & N Enterprises Co. Ltd. et al., 2004 MBQB 216 (CanLII):
The second decision, Lyons v. Hardy (1881), 2 N.S.W. L.R. 369 (S.C.), involves the fraudulent use of the shares of an insolvent company knowing them to be so. Again, the money was recoverable. The court’s finding was that, “That is a clear case of fraud”. The court’s comment under these circumstances was that “the Defendant, upon the circumstances of the case, is obliged, by the ties of natural justice and equity, to refund the money.” Where fraud has been pleaded, and it was not in the case at bar, there is a clear entitlement to the return of the money paid.
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