Voidable share contracts and contributory liability: delay in avoiding alleged fraud bars reliance after winding up begins.

A share purchaser could not avoid contributory liability on the basis that newspapers were not supplied free, because the arrangement did not make such supply a condition of the purchase and the prospectus showed the subscription was to be adjusted against dividend. Although fraud or misrepresentation makes a contract voidable, that right must be exercised within a reasonable time and before winding-up proceedings begin. Silence until winding up amounts to waiver, so the shareholder could not repudiate the agreement when called upon as a contributory.

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Issues: Whether the applicant was entitled to have his name removed from the list of contributories on the grounds that the promised newspaper supply was not given and that the share-purchase agreement was induced by a fraudulent prospectus.

Analysis: The stated arrangement did not make the share purchase conditional upon free supply of newspapers, and the prospectus indicated that the journal subscription was to be adjusted against dividend, not supplied free of charge. As to fraud, a contract induced by fraud or misrepresentation is voidable at the option of the party misled, but that right must be exercised within a reasonable time and before the commencement of winding-up proceedings. Where the shareholder remains silent until winding up and only seeks avoidance when called upon as a contributory, the right is treated as waived and cannot be asserted to defeat liability in the winding-up.

Conclusion: The applicant was not entitled to avoid the share-purchase agreement or escape contributory liability, and his name was rightly included in the list of contributories.

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