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PEEK V. GURNEY

Peek v. Gurney (1873) LR 6 (HL) 377

ISSUE:

  • Can somebody who is not among the original allottees of shares can make a claim for indemnity?

RULE:

  • This case concerns itself with the act of misrepresentation made in the prospectus. The concept of misrepresentation and fraud is given under Section 18 and 17 of the Indian Contract Act, 1872, respectively. The offender can be held liable for fraud under Section 447 of the Companies Act, 2013. The principle that evolved in this case was that an action of misrepresentation can only be brought by the misled party, or “representee”, which means that only those who were an intended recipient of the representation may sue.

FACTS:

  • The prospectus for a proposed company, Overend and Gurney (defendant), included information intended to induce the purchase of shares, which later proved misleading. The prospectus was issued in July, and all shares were allotted before July was over. Peek (plaintiff) purchased large numbers of shares in Overend and Gurney on the stock exchange in October and December. After the company’s dissolution, Peek sought indemnity. The master of the rolls rejected Peek’s claim because Peek was not among the original allottees of shares. Peek appealed as a result.

HELD:

  • House of Lords held that the prospectus was only addressed to the first applicants for shares. It could not be supposed to extend to others other than these. Thus, the appellant’s action against the promoters failed since the false statements in the prospectus were not addressed to him.