A prospectus for an intended company was issued by promoters who were aware of the disastrous liabilities of the business of Overend and Gurney which the company was to purchase. The prospectus made no mention of a deed of arrangement under which those liabilities were, in effect, to be transferred to the company. The appellant bought shares in the company and, when it was wound up, he was declared liable as a contributory and had to pay almost pounds 100,000. He sought an indemnity against the directors, alleging misrepresentation and concealment of facts by the directors in the prospectus.
Held: The action failed because he had not in fact relied on the prospectus but had purchased the shares in the market.
Lord Cairns expressed his agreement with the observations of Lord Chelmsford and Lord Colonsay that mere silence could not be a sufficient foundation for the proceedings: ‘Mere non-disclosure of material facts, however morally censurable, however that non-disclosure might be a ground in a proper proceeding at a proper time for setting aside an allotment or a purchase of share, would in my opinion form no ground for an action in the nature of an action for misrepresentation. There must, in my opinion, be some active misstatement of fact, or, at all events, such a partial and fragmentary statement of fact, as that the withholding of that which is not stated makes that which is stated absolutely false.’
Lord Cairns
(1873) LR 6 HL 377, [1873] UKLawRpHL 19
Commonlii
England and Wales
Cited by:
Cited – Hamilton and others v Allied Domecq Plc (Scotland) HL 11-Jul-2007
The pursuers had been shareholders in a company which sold spring water. The defenders took shares in the company in return for promises as to the promotion and distribution of the bottled water. The pursuers said that they had failed to promote it . .
Cited – Cheltenham Borough Council v Laird QBD 15-Jun-2009
The council sought damages saying that their former chief executive had not disclosed her history of depressive illness when applying for her job.
Held: The replies were not dishonest as the form could have been misconstrued. The claim failed. . .
Lists of cited by and citing cases may be incomplete.
Company
Updated: 05 December 2021; Ref: scu.254561