subscriber brings an action for damages for fraud and deceit, the subsequent acquisition of the property might have a material bearing upon the extent of his damages.48 It has been held that an action cannot be based upon a statement which, though false when the prospectus was issued, was made true before the time when the plaintiff applied for shares.49

An application for shares, made on the faith of a statement which though true when made became untrue before the shares were allotted, may be withdrawn,50 and if the fact that such statement had become untrue before the allotment, is, though known to the company, not communicated to the subscribers, the subscriptions made in reliance thereon may be rescinded.51 A promoter who makes the allotment without disclosing the changed circumstances which render his earlier statement untrue, may be liable for fraud and deceit.52

§ 227. Interpretation of prospectus.

A prospectus being usually intended for the general investing public and not for persons of technical training, is interpreted in accordance with the meaning that it would naturally convey to the ordinary mind.53 If the prospectus taken as a whole conveys a

938. And note to Cottrill v. Krum, 18 Am. St. Rep. 549, 555. See ante, § 209n.

48. Lehman-Charley v. Bartlett, 135 N. Y. App. Div. 674, 683, 120 Supp. 501, affirmed, 202 N. Y. 524, 95 N. E. 1125.

The effect of the subsequent acquisition of the property upon the amount of damages would differ according to the rule of damages applied. For the two rules of damages in such case see post, §§ 269, 277.

49. Ship v. Crosskill, L. R. 10 Eq. 73, 85-86; Moore v. Burke, 4 F. &

F. 258, 286, but see Reeve v. Dennett, 145 Mass. 23, 30, 11 N. E. 938.

50. Ex parte Brown, 95 L. T. N. S. 756, quoting Lindley on Companies, (6th Ed.), page 87.

51. See Traill v. Baring, 4 DeG. J. & S. 318.

52. Loewer v. Harris, 57 Fed. Rep. 368, 373, 6 C. C. A. 394, 14 U. S. App. 615. And see ante, § 207, note 44.

53. Wiser v. Lawler, 189 U. S. 260, 264, 47 L. Ed. 802, 23 S. C. 624; Tinker v. Kier, 195 Mo. 183, 94 S. W. 501; Downey v. Finucane, 205

false impression it is none the less false though there be difficulty in showing that any specific statement is, taken by itself, untrue.54

The court in estimating the probability of the public being misled by a prospectus will take into consideration, not only the facts stated, but also the facts suppressed.55

It is, however, not necessary to set forth such qualifications of the matters stated as would necessarily be implied.5

Allowance may be made for the sanguine expectations of the promoters, for no prudent man will accept the prospects which are always held out by the originators of a new scheme, without considerable abatement.57 Mere exaggerated statements of the prospects of a new enterprise will not subject those who make them to liability.5

Marginal notes will in general be construed as a mere index to the prospectus."

§ 228. Interpretation of prospectus in light of particular complainant.

It has been said that in determining whether the plaintiff was in fact deceived, it is important to consider whether he was, in view of his experience, a person likely to be misled by a prospectus or likely to place implicit reliance upon all that it contained.60 It has been said that an underwriter complaining of a misstate

ment in a prospectus stands upon a very different footing from a "careful investor" complaining of the same prospectus.61

§ 229. Interpretation of prospectus in light of its preliminary character.

In interpreting a prospectus its preliminary character may be taken into consideration and the present sometimes read as the future tense,62 but where the language of a prospectus clearly refers to something as already accomplished, it must be so interpreted.63 A dated report accompanying a prospectus will be read as of its own date, and not as of the date of the prospectus.64

§ 230. Interpretation of ambiguous statements in prospectus. A question of some difficulty arises when the language of the prospectus is susceptible of more than one meaning, and the promoters use the words in the sense in which they are true, while the complaining subscribers read them in the sense in which they are untrue. Some of the earlier English cases hold that the promoters may in such case be held liable for damages for fraud and deceit.

In Hallows v. Fernie,65 Lord Chancellor Chelmsford said, "If persons publishing a prospectus use such careless language that their statements literally read are untrue, although this literal sense is different from what they intended, this amounts to a misrepresentation, for which they may be responsible to any one who is deceived or injured by it."

61. Baty v. Keswick, 85 L. T. N. S. 18, W. N. 1901, 167; Banque Franco-Egyptienne V. Brown, 34 Fed. Rep. 162, 194.

62. Banque Franco-Egyptienne v. Brown, 34 Fed. Rep. 162, 191; Kelsey v. Northern Light Oil Co., 45 N. Y. 505; Hallows v. Fernie, L. R. 3 Ch. App. 467, 475.

63. Lehman-Charley v. Bartlett,

135 N. Y. App. Div. 674, 120 Supp. 501, affirmed, 202 N. Y. 523, 95 N. E. 1125; New Brunswick & Canada Ry., etc., Co. v. Muggeridge, 1 Drewry & Smale, 363, 370.

64. New Brunswick & Canada Ry., etc., Co. v. Conybeare, 9 H. L. Cas. 711, 728.

65. L. R. 3 Ch. App. 467, 476.

"A person who issues a statement," said Lord Justice Cotton in Arkwright v. Newbold,66" is not only answerable for what he in his own mind intended to represent, but he is answerable for what any one might reasonably suppose to be the meaning of the words he has used.”

In Peek v. Derry,67 the same judge said, "The plaintiff has a right to insist that the defendants are liable for the ordinary meaning of the words used, because, however much people in their own minds may mean to qualify their statements, if a man makes a statement which, according to its ordinary meaning, bears a particular construction, he, in my opinion, is liable to those who, reading it and construing it reasonably, do put upon it the primary meaning and the fair construction of the words used." Peek v. Derry was, however, reversed in the House of Lords, and the doctrine established that a promoter is not liable for fraud and deceit if he believes his representations to be true in the sense in which he makes them, and is not conscious of the fact that his words are susceptible of a different meaning; that unless a defendant is conscious that his words might be understood in a different sense from that in which he is honestly, though blunderingly using them, he is not guilty of fraud.68 This decision of the

66. L. R. 17 Ch. Div. 301, 322; cf. Smith v. Chadwick, L. R. 20 Ch. Div. 27, 79-80, 46 L. T. N. S. 702, affirmed, L. R. 9 App. Cas. 187, 5 Am. & Eng. Corp. Cas. 23.

If the prospectus is susceptible of more than one meaning, a subscriber claiming to have been deceived must prove that he read the prospectus in the sense in which it was untrue. Smith v. Chadwick, L. R. 9 App. Cas. 187, 198, 5 Am. & Eng. Corp. Cas. 23, affirming, L. R. 20 Ch. Div. 27, 45, 64, 65, 73-74, 76, 79, 46 L. T. N. S. 702; Arkwright v. Newbold, L. R. 17 Ch. Div. 301,

324; Hallows v. Fernie, L. R. 3 Ch. App. 467, 478; Capel v. Sim's Ships Composition Co., 57 L. J. Ch. N. S. 713, 714.

67. L. R. 37 Ch. Div. 541, 571. Quoted in Arnison v. Smith, L. R. 41 Ch. Div. 348, 359.

68. Derry v. Peek, L. R. 14 App. Cas. 337, 347-349; see also Angus v. Clifford, 1891, 2 Ch. Div. 449, 466467, 472, 478; Greenwood v. Leather Shod Wheel Co., 1900, 1 Ch. Div. 421, 434; Glasier v. Rolls, L. R. 42 Ch. Div. 436, 461. This rule was sometimes applied even before the decision of Derry v. Peek; see Smith