An innocent omission can in no event be made the basis of an action of fraud.73 The fact that the promoters were advised by counsel that a particular matter need not be disclosed does not, however, necessarily save them from liability."

74

§ 211. The same subject.-The English Companies Act.

The question of the liability of promoters for fraud and deceit because of their omission to disclose material facts is, in England, to a large extent controlled by statute. The English Companies Act of 1908 75 provides:

"81.—(1) Every prospectus issued by or on behalf of a company, or by or on behalf of any person who is or has been engaged or interested in the formation of the company, must state

(a) the contents of the memorandum, with the names,

descriptions, and addresses of the signatories, and
the number of shares subscribed for by them respec-
tively; and the number of founders or management

73. See Cazeaux v. Mali, 25 Barb. (N. Y.) 578, 584; Aaron's Reefs v. Twiss, 1896, App. Cas. 273, 287, and see ante, §§ 207-208.

74. Broome v. Speak, 1903, 1 Ch. Div. 586, 603, 618, 619, 620, affirmed, sub nom. Shepheard v. Broome, 1904, App. Cas. 342; Cackett v. Keswick, 1902, 2 Ch. Div. 456, 462.

And see ante, § 207, notes 36 and 47.

75. Stat. 8, Edw. VII., Chap. 69, § 81, et seq. See also Revised Statutes of Canada, 1906, Chap. 79, § 43.

These provisions of subdivision 1 of § 81 are taken without substantial change from the act of 1907, (Stat. of 1907, Chap. 50, § 2), which substantially amended the act of 1900, (Stat. of 1900, Chap. 48, § 10, Subdivision 1). The provisions of

paragraph "K" of subdivision 1 of 81 of the act of 1908 are to some extent taken from the provisions of the Companies Act of 1867, (Stat. of 1867, Chap. 131, § 38). The following authorities interpreting the earlier statutes have some bearing upon the construction of the present act.

The statute creates a new cause of action by making mere omissions the basis of an action for fraud. Cackett v. Keswick, 1902, 2 Ch. Div. 456, 463.

It is not, in order to recover under the statute because of the non-disclosure of a fact required to be disclosed, necessary to prove a fraudulent intent. Macleay v. Tait, 1906, App. Cas. 24, 29, 75 L. J. Ch. N. S. 90; Shepheard v. Broome, 1904, App. Cas. 342, affirming,

or deferred shares, if any, and the nature and ex-
tent of the interest of the holders in the property
and profits of the company; and

(b) the number of shares, if any, fixed by the articles as
the qualification of a director, and any provision in
the articles as to the remuneration of the directors;
and

(c) the names, descriptions, and addresses of the direct-
ors or proposed directors; and

(d) the minimum subscription on which the directors
may proceed to allotment, and the amount payable
on application and allotment on each share; and in
the case of a second or subsequent offer of shares,
the amount offered for subscription on each previous

Broome v. Speak, 1903, 1 Ch. Div.
586; Watts v. Bucknall, 1903, 1 Ch.
Div. 766, 773, affirming, 1902, 2 Ch.
Div. 628; Twycross v. Grant, L. R.
2 C. P. D. 469; Calthorpe v. Trech-
mann, 1906 App. Cas. 24, 75 L. J. Ch.
N. S. 90, 94 L. T. N. S. 68, 22 Times
Law Rep. 149.

The fact that the defendant honestly believed that the statute did not apply to the particular contract does not protect him from liability. Calthorpe v. Trechmann, 1906 App. Cas. 24, 75 L. J. Ch. N. S. 90, 94 L. T. N. S. 68, 22 Times Law Rep. 149; Twycross v. Grant, L. R. 2 C. P. D. 469; Shepheard v. Broome, 1904, App. Cas. 342.

The statute extends, but does not in any way limit, the common law liability of the parties responsible for the prospectus. Aaron's Reefs v. Twiss, 1896, App. Cas. 273; Arkwright v. Newbold, L. R. 17 Ch. Div. 301.

It is held that one cannot be held liable because of a prospectus issued without his authority, and subsequently ratified by him. Hoole v. Speak, 1904, 2 Ch. Div. 732.

The plaintiff must show that the prospectus was "knowingly issued" by the defendant. Calthorpe v. Trechmann, 1906, App. Cas. 24, 75 L. J. Ch. N. S. 90, 94 L. T. N. S. 68, 22 Times Law Rep. 149; Charlton v. Hay, 31 L. T. N. S. 437; Stevens v. Hoare, 20 Times Law Rep. 407, 409.

A failure to comply with the terms of the statute gives rise to an action for damages against the persons responsible for the prospectus. (In re South of England Natural Gas., etc., Co., Ltd., 1911, 1 Ch. Div. 573, 80 L. J. Ch. N. S. 358; Cackett V. Keswick, 1902, 2 Ch. Div. 456; Macleay v. Tait, 1906, App. Cas. 24, 75 L. J. Ch. N. S. 90; Shepheard v. Broome, 1904,

allotment made within the two preceding years, and
the amount actually allotted, and the amount, if
any, paid on the shares so allotted; and

(e) the number and amount of shares and debentures
which within the two preceding years have been is-
sued, or agreed to be issued, as fully or partly paid
up otherwise than in cash, and in the latter case the
extent to which they are so paid up, and in either
case the consideration for which those shares or
debentures have been issued or are proposed or in-
tended to be issued; and

(f) the names and addresses of the vendors of any prop-
erty purchased or acquired by the company, or pro-
posed so to be purchased or acquired, which is to be

App. Cas. 342, affirming, Broome v.
Speak, 1903, 1 Ch. Div. 586; Watts
v. Bucknall, 1903, 1 Ch. Div. 766,
affirming, 1902, 2 Ch. Div. 628; Twy-
cross v. Grant, L. R. 2 C. P. D. 469),
but does not entitle the subscribers
to rescind their subscriptions. (In
re Wimbledon Olympia, Ltd., 1910,
1 Ch. Div. 630; In re South of Eng-
land Natural Gas, etc., Co., Ltd.,
1911, 1 Ch. Div. 573, 80 L. J. Ch. N.
S. 358; Sullivan v. Mitcalfe, L. R. 5
C. P. D. 455, 465 466, 468; Gover's
Case, L. R. 1 Ch. Div. 182, affirm-
ing, L. R. 20 Eq. 114; Components
Tube Co. v. Naylor, 1900, 2 Ir. R. 1,
53-54. But see Askew's Case,
22 W. R. 762, reversed on other
grounds, L. R. 9 Ch. App. 664), thus
reversing the English common law
rule relating to the omission of
material facts. See ante, § 210.

The "prospectus" intended by the statute is that document offering shares to the public, upon the

strength of which the complainant actually entered his subscription. Roussell v. Burnham, 1909, 1 Ch. Div. 127. A prospectus not issued to the public is not within the statute. Baty v. Keswick, 85 L. T. N. S. 18, W. N. 1901, 167; Sleigh v. Glasgow & Transvaal Options, Ltd., Sess. Cas. 6 Fraser 420. The statute applies to an “abridged prospectus though this states where the full prospectus can be obtained, and the full prospectus refers to the contract in question. White v. Hayman, 1 Cab. & El. 101.

The act of 1867 required that the prospectus specify the dates and the names of the parties to any contract entered into by the company, or the promoters, directors, or trustees thereof, before the issue of such prospectus, whether the contract was subject to adoption by the directors, or the company or otherwise. (A like provision is contained

paid for wholly or partly out of the proceeds of the
issue offered for subscription by the prospectus,
or the purchase or acquisition of which has not been
completed at the date of issue of the prospectus,
and the amount payable in cash, shares, or de-
bentures, to the vendor, and where there is more
than one separate vendor, or the company is a sub-
purchaser, the amount so payable to each vendor:
Provided that where the vendors or any of them are
a firm the members of the firm shall not be treated
as separate vendors; and

(g) the amount (if any) paid or payable as purchase
money in cash, shares, or debentures, for any such
property as aforesaid, specifying the amount (if
any) payable for goodwill; and

(h) the amount (if any) paid within the two preceding
years, or payable, as commission for subscribing or

in the Revised Statutes of Canada,
1906, Ch. 79, § 43). Some judges
held that the statute required the
disclosure of only those contracts
which put an obligation on the com-
pany, but the rule generally adopted
was that the statute included every
contract the knowledge of which
might affect a reasonable person in
determining whether to subscribe
for shares. Sullivan v. Mitcalfe, L.
R. 5 C. P. D. 455; Twycross v.
Grant, L. R. 2 C. P. D. 469; Gover's
Case, L. R. 1 Ch. Div. 182, affirming,
L. R. 20 Eq. 114; Craig v. Phillips,
L. R. 3 Ch. Div. 722, and see L. R.
7 Ch. Div. 249; Cornell v. Hay, L.
R. 8 C. P. Cas. 328; Greenwood v.
Leather Shod Wheel Co., 1900, 1
Ch. Div. 421, 437; Cackett v. Kes-
wick, 1902, 2 Ch. Div. 456; Jury
v. Stoker, L. R. 9 Ir. 385, 401;

Coats, Ltd., v. Crossland, 20 Times Law Rep. 800, 807; Calthorpe v. Trechmann, 1906, App. Cas. 24, 75 L. J. Ch. N. S. 90, 94 L. T. N. S. 68, 22 Times Law Rep. 149; Charlton v. Hay, 31 L. T. N. S. 437; Stevens v. Hoare, 20 Times Law Rep. 407. These cases have, because of the change in language, little bearing upon the interpretation of the act of 1908.

The statute of 1867 applied to oral as well as written contracts. Capel & Co. v. Sims' Ships Compositions Co., 57 L. J. Ch. 713.

Compliance with the act of 1867 might be effectively waived by the parties. Macleay v. Tait, 1906, App. Cas. 24, 75 L. J. Ch. N. S. 90; Cackett v. Keswick, 1902, 2 Ch. Div. 456; Greenwood V. Leather Shod Wheel Co., 1900, 1 Ch. Div.

agreeing to subscribe, or procuring or agreeing to
procure subscriptions, for any shares in, or deben-
tures of, the company, or the rate of any such com-
mission: Provided that it shall not be necessary to
state the commision payable to sub-underwriters;
and

(i) the amount or estimated amount of preliminary ex-
penses; and

(j) the amount paid within the two preceding years or
intended to be paid to any promoter, and the con-
sideration for any such payment; and

(k) the dates of and parties to every material contract,
and a reasonable time and place at which any ma-
terial contract or a copy thereof may be inspected:
Provided that this requirement shall not apply to a
contract entered into in the ordinary course of the
business carried on or intended to be carried on by
the company, or to any contract entered into more
than two years before the date of issue of the pro-
spectus; and

(1) the names and addresses of the auditors (if any) of
the company; and

(m) full particulars of the nature and extent of the in-
terest (if any) of every director in the promotion

421; Watts v. Bucknall, 1903, 1 Ch.
Div. 766, affirming, 1902, 2 Ch. Div.
628; Calthorpe v. Trechmann, 1906,
App. Cas. 24, 75 L. J. Ch. N. S. 90,
94 L. T. N. S. 68, 22 Times Law
Rep. 149; Stevens v. Hoare, 20
Times Law Rep. 407. Subdivision
4 of 81 of the act of 1908, how-
ever, expressly provides that such a
waiver is void.

Before a subscriber can recover because of the omission from the

prospectus of some fact by the statute required to be disclosed, it must be proved that the plaintiff would not have subscribed had he known the truth, or else that the matter withheld was such that if disclosed it would reasonably have tended to deter an ordinarily prudent investor from applying for shares. Shepheard v. Bray, 1906, 2 Ch. Div. 235, 251, et seq., 75 L. J. Ch. N. S. 633, and cases cited, (but see 1907,