After eight months, the public investors found out the fact that Erlanger (and his syndicate) had bought the island at half the price the company (now with their money) had paid for it.

The House of Lords unanimously held that promoters of a company stand in a fiduciary relationship to investors, meaning they have a duty of disclosure.

He observed it would "be obviously unjust that a person who has been in possession of property under the contract which he seeks to repudiate should be allowed to throw that back on the other party’s hands without accounting for any benefit he may have derived from the use of the property… [or] making compensation for that deterioration."

It is, however, a short and convenient way of designating those who set in motion the machinery by which the Act enables them to create an incorporated company.

It imposes a fresh duty towards, and gives a new cause of action to, persons who take shares in the company as individuals; it does not affect the obligation of the promoters towards the corporation.

I think that the extent of that fiduciary relation, which, as already said, in my opinion, the promoters bear to the company, is a very important consideration in construing that section; and I am desirous to avoid prejudging that question by saying in this case more than is necessary for its decision.

Lord Eldon, in Gibson v Jeyes,[2] says that “it is a great rule of the Court that he who bargains in matters of advantage with a person placing confidence in him, is bound to shew that a reasonable use has been made of that confidence—a rule applying to trustees, attorneys, or any one else.” I think persons having property to sell may form a company for the purpose of buying it in such a manner as to shew this, and when they do so, the sale will be unimpeachable.

If they could have proved that Sir Thomas Dakin was told that the price at which the property had been recently bought was £55,000, and also that the knew that Westall, by whom the prospectus was prepared, from evidence which he had collected, was not a disinterested attorney, but one having a strong bias in favour of the vendors, they should have done so.

If such proof had been given, and it had been shewn that Sir Thomas Dakin, well aware that for these reasons he should receive the statements and evidence of value with caution, had satisfied himself that the bargain was a good one at £110,000, the case would have been very different.

In Clough v The London and North Western Railway Company,[3] in the judgment of the Exchequer Chamber, it is said, “We agree that the contract continues valid till the party defrauded has determined his election by avoiding it.

We think that so long as he has made no election he retains the right to determine it either way; subject to this, that if, in the interval whilst he is deliberating, an innocent third party has acquired an interest in the property, or if, in consequence of his delay the position even of the wrongdoer is affected, it will preclude him from exercising his right to rescind.” It is, I think, clear on principles of general justice, that as a condition to a rescission there must be a restitutio in integrum .

But as a Court of Law has no machinery at its command for taking an account of such matters, the defrauded party, if he sought his remedy at law, must in such cases keep the property and sue in an action for deceit, in which the jury, if properly directed, can do complete justice by giving as damages a full indemnity for all that the party has lost: see Clarke v Dixon,[5] and the cases there cited.

And a Court of Equity requires that those who come to it to ask its active interposition to give them relief, should use due diligence, after there has been such notice or knowledge as to make it inequitable to lie by.

Two circumstances always important in such cases are the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.” I have looked in vain for any authority which gives a more distinct and definite rule than this; and I think, from the nature of the inquiry, it must always be a question of more or less, depending on the degree of diligence which might reasonably be required, and the degree of change, which has occurred, whether the balance of justice or injustice is in favour of granting the remedy or withholding it.

The Plaintiffs in this case are an incorporated company; but I think that in considering the question of laches the Court cannot divest itself of the knowledge that the corporation is an aggregate of individuals.

Now in the present case every allottee had from the beginning by the prospectus full notice that the vendor, John Marsh Evans, was also one of their directors, which alone might have given them an equity to set aside the contract, though in every other respect it was unimpeachable.

They had, however, much more substantial equities, but they had also notice of more, for the prospectus referring to the contract, which was open to inspection at the office, I think each allottee was fixed with the knowledge, which he would have had if he had read it, that Evans had purchased from Chatteris so recently as the 30th of August, not quite three weeks before he sold to the company.

And the circumstances attending the nature of the property, which are mentioned by the Lord Chancellor in his opinion, were such as to make it proper for those who intended to get rid of the bargain to act with considerable promptitude.

It was clearly not equitable to leave the Defendants to all the risk of loss, and claim to themselves a profit; and this seems to be what Lord Eldon principally relied on in Norway v Rowe.