## Facts

- Overend, Gurney & Co., a bill-discounting firm, faced severe financial distress and sought to transfer its business and liabilities into a newly formed limited company, Overend & Gurney Company.
- The directors/promoters issued a public prospectus portraying the business favorably while failing to disclose a deed of arrangement that effectively shifted substantial bad liabilities to the new company.
- The prospectus was used to solicit subscriptions from the public for original share allotments.
- William Peek did not subscribe for an allotment in response to the prospectus; he later bought shares on the stock exchange from existing shareholders after allotment was complete.
- The company failed and was wound up in 1866; Peek was placed on the list of contributories and paid a large sum toward company debts.
- Peek sued the directors and others seeking an indemnity, alleging the prospectus contained misleading representations and material nondisclosures that induced his purchase.

## Issues

1. Whether directors who issue a misleading prospectus are liable in deceit (or analogous equitable relief) to a person who later purchases fully issued shares in the market, rather than subscribing as an allottee.
2. Whether a subsequent purchaser can sue absent a direct representational link between the directors’ prospectus and the purchaser as an intended recipient.
3. Whether mere nondisclosure of material facts in a prospectus, without an active misstatement or misleading half-truth, is actionable as deceit.
4. Whether delay in bringing suit barred relief in equity by analogy to limitations principles.

## Decision

- The House of Lords dismissed Peek’s appeal and denied indemnity.
- Directors’ responsibility for prospectus misstatements was owed to persons invited by the prospectus who become original allottees, not to later market purchasers.
- A prospectus is “exhausted” once it has performed its function of inviting allotments; liability does not follow the shares into subsequent transfers.
- Mere nondisclosure, without an affirmative misstatement or a partial statement rendered false by what is omitted, does not by itself support an action in deceit.
- Delay did not bar the claim on the pleaded timeline, but the appeal failed on the substantive requirements of actionable misrepresentation and proper reliance.

## Legal Principles

- Liability for misrepresentation is generally limited to the “representee”: the person (or class) to whom the representation is addressed and whom it is intended to influence.
- A company prospectus is directed to invite original subscriptions; directors’ prospectus liability does not automatically extend to later purchasers in secondary-market transactions.
- Deceit requires an active misstatement of fact or a statement so incomplete that the omission makes what is stated false or misleading; mere silence is not enough.
- Equitable delay defenses track limitations principles; where the analogous period has not run, delay alone does not defeat relief.

## Conclusion

The House of Lords held that directors are not liable on a prospectus to a later stock-exchange purchaser who was not an intended addressee and did not become an allottee in response to the prospectus, and that deceit requires a misstatement or misleading half-truth rather than mere nondisclosure.


Peek v. Gurney, L.R. 6 H.L. 377 (H.L. 1873)