Odger's English Common Law

LIABILITY OF A DIRECTOR. 557
only be made liable by means of the relation of principal and
agent. 1
But cases frequently occurred in which the directors of a new
company, who issued the prospectus, were not aware that the
statements which they so issued were untrue. They were
misled by the promoters of the company and innocently
published the facts and figures laid before them, and were
therefore not liable to those who were defrauded by means of
such facts and figures. To meet this difficulty an Act was
passed, which renders all persons, who authorise the issue of
a prospectus or notice, soliciting applications for shares or
debentures in a company, liable in certain cases for any untrue
statement contained in such prospectus or notice. 2
Such persons are liable to pay compensation to any one who, on the faith
of such prospectus or notice, has subscribed for shares, debentures or
debenture stock, and lias suffered damage by reason of any untrue statement
contained in the prospectus or notice, or in any report or memorandum
set out or referred to therein or issued therewith, unless they can prove
1. that, where the statement does not purport to be made on the
authority of an expert or of a public official document or statement, they
believed the statement to be true up to the time of allotment ;
2. that, where the statement purports to be made by an expert, or to be
contained in what purports to be a copy of or extract from a report or
valuation of an engineer, valuer, accountant or other expert, it fairly
represented the statement made or was a correct and fair copy or extract,,
unless they had no reasonable ground for believing that the person making
the statement, report or valuation was competent to make it ;
3. that, where the statement purports to be made by an official person,
or to be contained in what purports to be a copy of or extract from a public
official document, it was a fair and correct representation of such statement,
copy or extract ;
or
4. that, having consented to become directors, they withdrew their
consent before the issue of the prospectus or notice, and that the same was
issued without their knowledge or consent ;
5. that the prospectus or notice was issued without their knowledge or
consent, and that on becoming aware of its issue they forthwith gave
reasonable public notice of such fact ;
or
6. that after the issue of such prospectus or notice and before allotment
thereunder they, on becoming aware of any untrue statement therein, with-
drew their consent thereto and caused reasonable public notice of such
withdrawal, and of the reason therefor, to be given. 3
1 See Weir v. Bell, tuprd.
2 The Directors' Liability Act, 1890 (53 & 54 Vict. c. 64), re-enacted by the Companies-
(Consolidation) Act, 1908 (8 Edw. VII. c. 69), s. 84.
s See last note, and Maoleay v. Tait, [1906] A. C. 24.
or
or
or
—