Odger's English Common Law

556 FRAUDULENT MISREPRESENTATION.
should be communicated, and whom in either case he intended
to act upon it. If one of those persons of his own accord,
whether fraudulently or innocently, repeats that statement to
others, the originator of the statement will not be liable to
those others, unless it can be shown that he intended and
desired that his statement should be repeated to them. But
if a statement be published in a newspaper with the object of
influencing the readers of that paper generally, any one who
has read the statement in that newspaper and acted upon it
may claim that it was made to him; and he can sue the
defendant if he has sustained any loss through the defendant's
misrepresentation
.
1
Thus, in the case of a prospectus of an intended company which conceals
material facts or contains express misrepresentations of the truth, where
the plaintiff receives a copy from the directors or their agents inviting
him to take shares and on the strength of the false statements in it
applies to the directors for shares, which are allotted to him and turn out
to be worthless, he can recover from the directors the money paid for the
shares. It was held in Peek v. Gurney and others 2 that the proper pur-
pose of a prospectus of an intended company is to invite persons to become
allottees of the shares ; and that when it has performed this office, it is
exhausted. But such a prospectus is now, as a rule, very widely circulated
and advertised in newspapers, and it must therefore be taken to influence
all who read it in the newspapers as well as those to whom it is sent
personally by the directors or their agents. Hence, there may be circum-
stances under which directors will be liable to a person who bought shares
in the open market, provided he did so on the faith of the false statements
contained in the prospectus, whether he personally received a copy of it or
whether he merely saw it in a newspaper. 8
The main difficulty in the way of a plaintiff, who sues the
promoter or a director of a company for a fraud which has
caused him damage, is to connect the particular defendant
with the fraud complained of, and so make him responsible
for its consequences. Sometimes doubtless this may be done
directly, e.g., where the defendant has signed prospectuses,
has attended and taken part at meetings of the directors or
shareholders, or has surreptitiously received moneys belonging
to the company. More often, perhaps, the defendant can
i Gerhard v. Bates (1853), 2 E. & B. 476.
2 (1873), L. R. 6 H. L. 377 ; and see Weir v. Barnett and others (1877), 3
Ex. D. 32 ; Weir v. Bell and others (1878), 3 Ex. D. 238.
3 Andrews v. Mochford, [1896] 1 Q. B. 372.